Payment and rights to withhold

Reckoning periods of time

The terms of the contract will set out the time limits within which the different steps in the payment process must be taken. Time limits are often expressed as a number of days before or after a given event. It is usual for the contract to provide instruction as to the reckoning of periods of days.

Section 116 of the HGCRA provides for the reckoning of periods of time under Part II of the HGCRA. Where an act is required to be done within a specified period after or from a specified date, the period begins immediately after that date. Where the period would include Christmas Day, Good Friday or a day which under the Banking and Financial Dealings Act 1971 is a bank holiday in England and Wales or, as the case may be, in Scotland, that day shall be excluded.

Rights to withhold payment

A party to a construction contract to which the Housing Grants, Construction and Regeneration Act 1996 applies in its unamended form cannot withhold payment of a sum due under the contract after the final date for payment unless they have given an effective notice of intention to withhold payment (often referred to as a 'withholding notice').

It is important to remember that these provisions apply to sums due under the final certificate as well as interim payments.

If a valid withholding notice is not given the sum due under the contract must be paid in full, without any set-off of cross-claims or contra-charges.

Similarly in a contract to which the Housing Grants, Construction and Regeneration Act 1996 applies as amended by the Local Democracy, Economic Development and Construction Act 2011, a party who has not served a valid pay less notice must pay the notified sum in full on or before the final date for payment (see Payment notices). As under the previous regime, failure to serve a valid pay less notice will mean that the notified sum must be paid in full without set-off of cross-claims or contra-charges.