The following Construction practice note Produced in partnership with Womble Bond Dickinson provides comprehensive and up to date legal information covering:
This Practice Note considers ‘pay when paid’ clauses and ‘pay when certified’ clauses in construction contracts, and the relevant provisions of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996). Specifically, it looks at:
HGCRA 1996, s 113—which prohibits pay when paid clauses except in the case of insolvency of a third party
HGCRA 1996, ss 110(1A)–(1D)—which prohibit ‘pay when certified’ clauses and were introduced by the Local Democracy, Economic Development and Construction Act 2009 (LDEDCA 2009)
‘Pay when paid’ clauses are clauses which make a payment under a construction contract contingent upon a payment being made by a third party under a separate contract.
An example of a pay when paid clause is:
Notwithstanding anything to the contrary elsewhere in this Sub-Contract if the Employer or any such person as is responsible for discharging payment to the Contractor under the Main Contract, as the case may be, is insolvent as defined in Clauses 32.2, 32.3 and 32.4, the Contractor shall not be obliged to make any further payment to the Sub-Contractor or any amount which is due or may become due to the Sub-Contractor unless the Contractor has received payment in respect thereof from the Employer or such other person, as the case may be and then only to the extent of such receipt.
Prior to the enactment of HGCRA 1996, ‘pay
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