Contractors cannot simply stop work if they aren’t paid, cautions Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC). In most building contracts, there aren’t provisions that legally permit the contractor to suspend work if the employer fails to pay by the due date, nor are there contractual rights to remove materials and goods from site.
A contractor needs to compel the defaulting employer to honour the contract or seek other methods of obtaining payment if he or she isn’t paid on time.
“The contractor could, for example, offer the employer payment terms, and should the employer still not pay, the contractor could then have the contract cancelled and sue the employer for damages,” says Uwe.
Contractor payments can fall into two categories, namely interim payments and progress payments.
Interim payments are based on valuations prepared by the principal agent for work done at a given point. These are usually prepared monthly by no later than a specified date and repeated every month until the final payment is received. The valuations should represent the total amount of work carried out to date, including unfixed materials and goods procured by the contractor, less any amounts previously certified.
“While the obligation to prepare the valuation and issue the certificate rests with the principal agent, the contractor is required to assist him or her to determine the valuation by preparing and supplying a claim for payment, incorporating measurements and valuations based on the bill of quantities of duly completed work, and material and goods, together with relevant documents such as invoices,” says Uwe.
Progress payments are payments for work completed or progress achieved and are based on pre-determined milestones. The progress payment method is used where no bills of quantities have been used and is mainly employed for smaller type projects.
For more information, contact the JBCC on Tel: +27 (11) 482 3102 or via www.jbcc.co.za.