Payment terms
Payment terms in a construction contract in the UK can vary but typically include several key elements to ensure clarity and proper compensation for the work performed. Some common payment terms might include:
- A payment schedule outlining the timing of payments, such as monthly, bi-monthly, or upon completion of specific project milestones. Typically interim payments will be made at intervals during the project based on completed stages or milestones and details the amount and timing of the final payment upon satisfactory completion of the entire project.
- Retention is a percentage (commonly 5-10%) of each payment retained by the employer until the project reaches practical completion.
- Valuation dates and payment notices outlines the procedures for issuing payments, the amount due for payment and any deductions. In the UK this is regulated by the Housing Grants, Construction and Regeneration Act.
- Variation terms, covering the process for handling changes or additional work, including how these changes are valued and paid for.
- Dispute resolution procedures, outlining procedures for resolving disputes related to payments, such as mediation or arbitration.
- Interest on late payments to be charged if payments are made after the agreed-upon deadline.
- Fluctuations to account for inflation.
- Damages to be paid in the event of breach of contract, such as failure to complete the project by the date set in the contract.
These terms are essential to ensure a clear understanding of how and when payments will be made throughout the construction project, reducing the likelihood of disputes and ensuring fair compensation for the work completed by the contractor.
[edit] Related articles on Designing Buildings
- Contract clauses.
- Fair payment practices.
- Fluctuation.
- Housing Grants, Construction and Regeneration Act.
- The Late Payment of Commercial Debts Regulations 2013.
- Payment notice.
- Project bank accounts.
- Prompt payment code.
- Retention.
- Scheme for construction contracts.
- Small Business, Enterprise and Employment Bill.
- The causes of late payment in construction.
- Variations.
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