Timing stipulations in commercial contracts can be inflexible and failure to comply with them can be very costly indeed. In a recent case, a building company's failure to submit an interim application for payment on time has resulted in a considerable delay in the receipt of more than £480,000.
The company had been employed by a local authority to build new classrooms for a primary school. The contract provided for payment to be made in instalments but required that applications for payments had to be served on particular dates.
When the council refused to pay an interim bill for £484,759, the company referred the dispute to an adjudicator who directed the council to meet the demand. However, in upholding the council's challenge to that decision, the High Court found that the company's application for payment was invalid in that it had been submitted six days earlier than it should have been.
The payment schedule laid down in the contract was strict and its terms had not been waived by the council. In those circumstances, the company was ordered to repay the money to the council. The Court, however, acknowledged that the company may be entitled to a further payment when it submits its final account.
Cash flow is often critical to the successful management of building projects, and failure to adhere to the agreed regime for payments can cause significant difficulties.