Cold Link Africa November / December 2019 | Page 38

CONTRIBUTORS
INCORPORATING COLD CHAIN
Payment agreements/clauses need to be clearly stipulated even after the contract is cancelled.
the contractor remains the party that is liable to
the employer for defects in any part of the works
including any n/s works 12 . A direct payment for
unpaid materials and goods (and completed n/s
work) should at the very least be very specific as
to what is being paid for and the amount thereof
as well as the specific terms on which it is made so
that the possibility for a later vindicatory action by
the employer against the subcontractor is at least
possible 13 on the basis of records.
7. It is therefore submitted that aside from a
reconciliation of the amount due to the
subcontractor for materials and goods on site and
payment of any outstanding balance directly to the
subcontractor, the settlement of the amount due
on the n/s final account would have to be through
the office of the principal contractor and in terms
of clause 34.0 which would, for those purposes, be
deemed to survive the termination as suggested by
the wording of clause 38.5.4.
8. NSSA clause 34.5 very specifically provides that
except for terminations in terms of clauses 36 14
(subcontractor’s default) and 39 (vis major), the
issue of the final completion certificate is a pre-
requisite for the issue of the final payment certificate.
Therefore, whilst the subcontractor is entitled to
interim payment of amounts for work and materials
not certified by the date of termination, the
subcontractor will not be entitled to a final payment
advice before the final payment certificate is
issued to the contractor. This potentially impinges
the available security between the contractor and
subcontractor.
9. The principal agent should compile and issue a final
account for the n/s works as completed at date of
termination including materials and goods payable
in terms of clause 38.5.5 and 38.5.7, reflecting the
full amount due to the subcontractor and adjust for
12.
direct payments in terms of clause 38.5.5 and 38.5.7
by way of a recovery statement item. Sadly, the
principal building agreement at clause 33.2.8, whilst
providing for direct payments in terms of clauses
20.6 (failure to pay nominated subcontractors)
and 21.6 (failure to pay selected subcontractors)
does not include a specific provision for recovery of
direct payments in terms of NSSA clause 38.5. The
conclusion can be made that the direct payments
resort under PBA clause 33.2.6 (… expense and loss
… resulting from … the agreement being terminated
[36.0]) thereby defining the need to make direct
payment as a prejudice incurred by the employer
as a result of terms stipulated for in the termination
provisions of the subcontract which practically
result in privity of contract between employer and
subcontractor because the subcontractor acquires
a direct entitlement to payment. This would probably
be the preferable route when insolvency supervenes
as the liquidator is only entitled to such funds as
may become available for the completed project
after deduction of all costs of bringing the works to
completion.
10. Any direct payment of certified amounts in terms
of PBA clauses 20.6/21.6 based on certificates
issued prior to termination but after insolvency
has supervened would probably be capable
of challenge by the liquidator 15 and should be
carefully considered. This does not preclude the
subcontractor from adding them as an effective
premium claimed by the subcontractor within
its price for completion of the n/s works thereby
effectively rendering it an expense and loss to the
employer in terms of PBA clause 33.2.6.
*Note: this is not a legal opinion and no liability for
reliance on its contents attaches to the writer or
sender.
CLA
See Minister of Public Works and Land Affairs v Group Five Building Ltd 1999 (4) SA 12 (AD)
13. Reliance on common law actions such as the actio quanti minoris, condictio indebiti and the like is subject to very strict
application and there is no better than a mutually agreed process and grounds for correction of an overpayment.
14.
It is submitted that there is an error in this clause, and it should read 38 rather than 36.
15. See Administrator, Natal v Magill, Grant & Nell (Pty) Ltd (in Liquidation) 1969 (1) SA 660 (A) 671H-672B.
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COLD LINK AFRICA • November/December 2019