The Problem

I am a carpentry sub-contractor, with most of my work coming from one source, a main contractor.  When I take on work for this contractor, it is usually by way of a verbal agreement.

Every Friday they email me a list of work to be carried out the following week, and at the end of that week, I email an invoice for each individual job.  The verbal agreement on payment is 7 days and the contractor makes payment straight into my bank account.  This has been the case for several months.

However, no payment was received from the contractor on 31 March.  When I spoke to them, they said that full payment would be made the following Friday.  This did not happen, and when I chased them up, they stated that one job I had done was unsatisfactory.  I immediately attended to this, only to be subsequently told that the job was still not satisfactory and they had employed someone else to fix the problem.  They have since told me that they will be contra-charging me for the cost, and in the meantime will be withholding all payments due to me until they know what the cost is.  They also stated that as there is no written agreement on payment terms, I cannot class the payment as late.

As they did not notify me that they still had an issue with my work and allowed me the chance to put the supposed issue right, can they then contra charge me?

I have since sent 3 final payment demands, but received no replies.  Nor have I received a pay less notice.  If payment was due on 31st March 2017, can this now be classed as having missed the final date for payment?  Also, has the contractor missed the chance to issue me with a pay less notice?

Name withheld

Michael’s Response

There is a binding contract at the point that you commenced the work (your commencement signifies your acceptance of the main contractor’s offer for you to carry out the work listed in the email), and this is known as contract by conduct.  Although there may be an absence of written terms, there will be implied terms and terms that may be incorporated in each contract by reference to your previous course of dealings with the main contractor, providing there was a reasonable expectation that the term you seek to rely upon would apply, and there are no other contrary terms.

In addition, the Housing Grants, Construction and Regeneration Act 1996 (as amended), will also apply to your contract, which in turn will imply part 2 (payment) of the Scheme for Construction Contracts, and although you may not be entitled to stage payments (for stage payments to apply, the duration of a contract must be estimated not to be less than 45 days), you will be entitled to receive payment by the ‘final date for payment’, although this is a much longer period than the 7 days you have said you agreed with the main contractor (it will be at least 47 days following completion of the work).

Whether or not the contractor has failed to issue you with a timeous pay less notice will depend on whether the previous course of dealings or the Scheme for Construction Contracts applies, although in all probability, in the absence of a pay less notice under either term, the contractor would have missed its chance.

On the contra-charge, the contractor must give you an opportunity to carry out the remedial work.  Whether or not your first attempt to make good is considered as giving you that opportunity will depend on the actual circumstances.  That said, without a timeous pay less notice, the contractor is not permitted to make any deductions from the amount due.

The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.

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