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Read More>>Getting Paid
No one can be unaware of the doom and gloom of economic news that is appearing on a daily basis. Contractors and house builders are having a difficult time especially with the problems in the mortgage market.
There are precautions that one can take to try and avoid being caught in the non-payment trap. In particular be careful of the warning signs such as late or missed payments from the employer or the main contractor, even under-payment of your applications for payments. Check the financial status of your Employer or the main contractor and listen to any whispers on the grape vine in respect of your employer, main contractor or even your sub-contractors if you are dependent on them because of the specialist nature of their work. Do this on a regular basis.
It is always difficult to juggle between getting paid on the due date but also trying not to upset your employer or the main contractor especially if you would like to work for them again in the future. However if it seems that late payment is not just a one off but is happening on a regular basis then this should be sounding warning bells and is likely to be the start of a financial problem.
Keep badgering the employer’s agent by making regular phone calls to find out what is happening and if necessary follow this up by letters or even a solicitors letter demanding payment. If this does not do the trick then there is your right to suspend the works under the contract and also to take adjudication proceedings. At this point it is very much a juggling act as to threats against damaging your relationship with your employer and main contractor but also getting paid.
Practical steps to help may be to reduce the amount of plant and materials that you have on site or even scaling back the amount of work that you are doing. If you do have materials and plant on site then make sure it is clearly named to show ownership so that it cannot or ought not be seized should the worst happen.
The main step you should take is to check your contract terms. It is well known that when work is short contractors will take on any sort of contract which could lead to problems in the future. Take a thorough look at the risks or potential problems if you are about to take on a new contract. If you are still negotiating your contract terms then try and get a clause agreed that the employer will pay the retention monies into a separate account which should be held in joint names to give you some protection. Alternatively, request that the amount is paid into an Escrow account which will allow you to draw on it. The important thing is to understand the contract and to know what you are letting yourself in for. Always get the contract signed before you start on site although this may be wishful thinking but it does save a lot of arguments in the future.
If you are in the middle of a contract and payment is drying up then check the clauses of the contract concerning notice to suspend work and even the clauses relating to insolvency. Insolvency clauses normally bring the contract to an end, some immediately, but others notice has to be given first.
Insolvency is basically the inability to pay your debts as and when they fall due or where the value of your assets is less than the amount of your liabilities. There are different forms of solvency, i.e. administration, liquidation, receivership. However, if a company or individual to the contract either voluntarily or involuntarily goes into insolvency then the insolvency clause in the standard forms of contract will come into play.
If you are a contractor and you have received notice that your employer has become insolvent then your obligations to carry out the works is suspended. However, in this situation you should also consider giving notice to any of your subcontractors to stop their contracts provided you are in a position to do so. This is where it always pays to make sure your contracts up and down the line all tie in together.
There are steps that can be taken to protect yourself and in these uncertain terms it is best to carry out a risk management assessment of your projects to ensure that you do not get inadvertently caught.
If you would like any further information on debt and insolvency issues then please contract Sarah Shemmings on office@shemmingsllp.co.uk or +44 (0) 845 345 1244.