BUSINESS AND TRAINING |
INCORPORATING COLD CHAIN |
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best to discuss this with your lawyer and look into adjudication as an avenue to enforce payment .
“ A new low-value dispute adjudication model has been developed by CAASA ( Construction Adjudication Association of South Africa ) with MDA director Vaughan Hattingh ,” says Goddard , “ This may be suitable to your subcontracting arrangement . While the process does require time and costs , it may be quicker and cheaper than fighting in court .”
If you find yourself in this position , don ’ t wait : take action as soon as possible .
“ As construction specialists , we find that subcontractors spend a few months trying to follow up payment ,” says Goddard , “ You can rely on follow up via calls and messages for a couple of weeks , but then take decisive action to pursue the
I can ’ t pay you
because I haven ’ t
been paid ,” is
something that
subcontractors are
very accustomed to
hearing .
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outstanding payment with a qualified attorney . You may find that there is a reason for why payment is being withheld and you can quickly rectify it once you are aware of this on your side .”
There is often a conflict between the terms proposed by the subcontractor in its quotation , and the contractor in its purchase order or the subcontract agreement which is issued . This conflict can create confusion and ambiguity . For example , a subcontractor provides a quote for the work which includes payment terms – say seven days after certification . A purchase order is issued , which states that payment term is 30 days . If you were expecting payment in seven days but it takes longer , these payment terms can wreak havoc on your cash flow , especially if you have debt obligations to suppliers . Ensure that you carefully fill out the contract data if it appears in your contract . For example , there is a dispute resolution clause in the JBCC standard form contract which requires subcontractors to select either adjudication or arbitration should a dispute arise . If you don ’ t select one of the two options , the default action is to go to court , and litigation is much more expensive than adjudication and arbitration .
Negotiate your subcontracts properly with amendments that mitigate the risk of a strict ‘ paid when paid ’ situation . If the contractor is reluctant to consider this kind of amendment , it may be a greater risk for the subcontractor to take on .
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What clauses should you look out for ? Is there a ‘ pay when paid ’ clause ? It is essential to have clear payment terms that allow for meeting your payment obligations to suppliers and labour .
Establish when your retention money is going to be certified and paid . Given that the employer generally withholds a portion of the contract value until after all possible snags are satisfactorily resolved , you need to know what the contractor has agreed to . Your portion of the work may occur right at the beginning of a project with a five-year period . Depending on the contractor ’ s agreement with the employer and your subcontract , the subcontractor may be in a situation where payment is only due after six years .
Does the contract outline what process is to be followed in the event of a dispute ?
Does your contract include the right to suspend or terminate if there is a breach such as non-payment or a lack of construction information necessary for you to complete the work ?
“ The most important right you have is to be paid for what you have done ,” asserts Goddard , “ If you can ’ t negotiate anything else in the contract , ensure that you are clear on this issue . Attempt to agree to amendments with the contractor . In addition , look into the financial position and payment history of the contractor .”
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There is no legislation in South Africa to protect subcontractors against ‘ paid when paid ’ clauses . The reality is that SA law is under-developed in this particular respect . This could be because the amounts in dispute might not justify the cost of trial . This means there isn ’ t much case law on this .
There are four standard form contracts used in the construction sector and one of these , the JBCC ( Joint Building Construction Committee ) is commonly used in subcontracting .
FIVE TIPS TO ENSURE A BETTER OUTCOME
1 . Become familiar with your subcontracts and the standard form subcontracts used regularly .
2 . Properly negotiate subcontracts to ensure you mitigate risks . If the contractor is unwilling to negotiate , the risk may not be worth it .
3 . Ensure that your payment terms with suppliers and labour align with the payment terms of the contractor . There is always a domino effect .
4 . Be proactive in managing your subcontract and enforcing your rights . Ensure that clear communication is addressed to the contractor in this regard when required .
5 . When making any major decision , always get external advice to ensure that what you have in your mind is in the contract . Construction law specialists are important ! CLA
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