Entitlement 2 - How your Contract Protects your Right to payment
Entitlement is your right to payment of the amounts claimed in your payment claims. It also establishes your rights in relation to the amounts you are required to pay to your suppliers and subcontractors.
Your entitlement to payment is established by two things, CONTRACT and LEGISLATION.
This post, we will look at how your contract establishes your entitlement to payment.
First and foremost, always prepare and sign a written contract, whether the work is for your best client or your best mate. Handshake deals are almost impossible to prove and usually wind up as your word against their's. The BSA has a standard form contract that will suit the type and size of building work you are proposing to do.
The Qld. Payment's Act (BCIPA) makes a signed contract even more important than ever.
As a Principal it is just as important to have written sub-contracts and supply agreements to protect your right to withhold payment, if need be.
For maintenance work and any similar continuing agreement you need a Period Contract or Terms and Conditions that protect your rights (some period contracts, including the QMBA contract do not do this).
The contract clauses that establish your entitlement to payment are:
Your Contract Sum (or terms of payment in a Cost Plus contract)
If you are asked to sign a contract or sub-contract prepared by the principal (or a principal contractor), make certain that:-
you are not required to do more work than you have priced for, or take risks that you can not manage, and
the payment clauses are not so restrictive that they are difficult or impossible to comply with.
Issues that affect you entitlement to payment are:
Supporting documents with a progress claim.
For each job, prepare a schedule of contract work that you can claim progress payments against. It should be clear and detailed enough to allow your client to respond in a payment schedule, if they want to. Include variations and adjustments to provisional sums and quantities. If your contract management system does not have this capability, use a spreadsheet that you can update at each claim. Thepowertool is a dedicated complying payment claim and response system that saves time and money, whilst ensuring your compliance.
Include statutory declarations and other documents that are a pre-condition to payment.
Tip: Be very careful about clauses that allow your client to ask for more detailed information after you have submitted your payment claim. These clauses are often designed to avoid or delay payment.
Make a note of every change to your contract. It can be a new drawing, an instruction (written or oral), or a direction to change the timing or sequencing of your work. Notify your client at the earliest time of each variation either in accordance with your contract or listed with your payment claim at the end of the month. Variations can be maintained in your payment claim spreadsheet, if your contract management system does not include variation management. MIAC Mobile Site Diary is a very efficient way to record and action variations, delays and other changes, accurately and instantly.
Many contracts include clauses that require you to notify the principal if an instruction involves a variation, or to agree the price of variations before proceeding. Do not ignore these provisions. Even though you may be pushed by a project manager to start the work, complying with these provisions is always be a pre-condition to getting paid. You may be required to action instructions very quickly. MIAC Site Diary is a very efficient way to record and action variations, delays and other changes, accurately and instantly.
Align your contract with the Payment's Act (BCIPA). Make sure that the contract includes:
A reference date for payment. (the date after which you can make a payment claim).
Interest on overdue amounts.
Sign conditions that you can't or haven't priced. A classic tactic is to agree to a construction program with no penalties for delay and disruption. Non-payment for delays, caused by others, that you can not manage has sent many contractors and sub-contractors to the wall.
Sign a lump sum contract for “finance purposes”, on the understanding that the contract is Cost Plus (Clients ask for this all the time. When things go wrong, clients will attempt to hold you to the fixed price).
If you would like regular information and advice on trends in payment in the construction industry, subscribe to Getting Paid at www.aiqsana.com.au by clicking on the subscribe button, or write to email@example.com.
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AfrikaansAlbanianArabicArmenianAzerbaijaniBasqueBelarusianBengaliBosnianBulgarianCatalanCebuanoChichewaChinese (Simplified)Chinese (Traditional)CroatianCzechDanishDutchEnglishEsperantoEstonianFilipinoFinnishFrenchGalicianGeorgianGermanGreekGujaratiHaitian CreoleHausaHebrewHindiHmongHungarianIcelandicIgboIndonesianIrishItalianJapaneseJavaneseKannadaKazakhKhmerKoreanLaoLatinLatvianLithuanianMacedonianMalagasyMalayMalayalamMalteseMaoriMarathiMongolianMyanmar (Burmese)NepaliNorwegianPersianPolishPortuguesePunjabiRomanianRussianSerbianSesothoSinhalaSlovakSlovenianSomaliSpanishSundaneseSwahiliSwedishTajikTamilTeluguThaiTurkishUkrainianUrduUzbekVietnameseWelshYiddishYorubaZulu
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