Construction Industry Sub-Contracts - Payment on Notice Issued by Contractor
The sub-contracts in this subfolder are suitable for all types of small scale construction project. They can be used by a builder or main contractor to engage an electrician, plumber, plasterer or bricklayer or any other specialist tradesperson.
These sub-contracts provide for a payment to be made in instalments following service of a payment notice by the contractor. Some of the templates make provision for retention to be held by the contractor. The retained sum is paid to the sub-contractor when the defects liability period has expired, so long as the sub-contractor has remedied any defects.
All of the templates include detailed provisions to ensure the parties understand what is expected of them, thus reducing the scope for disputes. Descriptions of the main contract works and the sub-contract works need to be inserted. A timescale is set out for completion of the works and the agreement lists the day-to-day obligations of the contractor and sub-contractor. The sub-contracts have clauses dealing with payments to the sub-contractor, the sub-contractor’s liability and insurance.
In other subfolders we have construction sub-contracts providing for payment in instalments on receipt of the sub-contractor’s invoice, templates providing for one-off payment on practical completion of the works and more robust templates for larger projects.
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Frequently Asked Questions
What is a payment notice and a pay less notice under the Construction Act? +
They are the two key payment notices the Housing Grants, Construction and Regeneration Act 1996 uses. A payment notice states the sum due for a payment cycle and how it is worked out. A pay less notice is served later if the paying party intends to pay less than that sum, and it must be given by the deadline, generally at least seven days before the final date for payment, with the basis for the reduced figure. These subcontracts follow that structure so payments are notified correctly.
I want to control payments by issuing a payment notice, is there a template for that? +
Yes. In these subcontracts the contractor initiates each payment by serving a payment notice on the subcontractor, rather than waiting for an invoice. They suit contractors who want to certify and control what is paid at each stage. Like the others they cover the works, a completion timescale, the parties' obligations, payment, liability and insurance. They are usable for any trade on a small scale project. Choose this version where you prefer to drive the payment process.
What happens if I forget to issue the payment notice? +
If the contractor fails to serve a payment notice, the subcontractor can serve its own default payment notice, and that notified sum generally becomes the amount you must pay unless you serve a valid pay less notice in time. In other words, missing the notice can leave you owing the subcontractor's figure. That is why the payment discipline in these templates matters: keep to the notice timetable so you retain control over what is certified and paid.
Can the subcontractor stop work if I do not pay? +
Yes. Under the Construction Act, if you do not pay the sum due by the final date and have not served a valid pay less notice, the subcontractor has a statutory right to suspend some or all of the works. They must give at least seven days written notice of intention to suspend and the grounds first. Suspension for non-payment is a real remedy, so keep payments and notices in order. These templates are drafted with that right in mind.
