Is the employer entitled to delay payment if bank funding is delayed?
All the standard form contracts have precise provisions which state the way in which payments are to be made to the contractor and the timing of such payments. Typically, the quantity surveyor prepares a valuation and within 7 days the architect issues a certificate for the amount in the valuation or such other amount as the architect decides is due to the contractor. Usually, the employer has 14 days from the date of issue of the certificate in which to pay the amount certified. Where there is an architect’s certificate the employer must pay the amount certified within the 14 days unless a written withholding notice has been issued no later than the prescribed period (5 days in JCT contracts, 7 days under the Scheme) before the final date for payment. Where a withholding notice is served, it must be an effective notice and the grounds must be valid grounds. A withholding notice is essentially in respect of what, in litigation, would amount to a set-off or counterclaim. It must be a valid reason for refusing to pay the whole or part of the money due to the contractor. Therefore, if the employer issued a withholding notice which gave as grounds for withholding: ‘I have not enough money’, that would not be a valid ground. If the employer says that bank funding is delayed, that is tantamount to saying that he or she has no money. So far as the contractor is concerned there is a binding contract which provides that money must be paid. If the employer fails to pay, that is a breach of contract. Therefore, the simple straightforward answer to this question is ‘No’.