Is your construction business vulnerable to payment disputes? This court case offers a warning.
construction industry: ‘pay now, argue later’. The case, Kitchener & Co (1989) Limited v Concrete Solutions Limited [2024] NZHC 653, highlights the importance of timely payments to prevent costly project delays. Let’s delve into what this means for the industry and how Payapps can help
manage potential disputes.
The Case in Brief
- A contractor and a developer entered into a contract for concrete repair and strengthening work on an apartment building.
- The contract included a “no set-off” clause, meaning the developer couldn’t withhold payments due to disputes over the contractor’s workmanship.
- Despite this, the developer withheld payments, alleging the work was defective.
- The contractor invoked the Construction Contracts Act 2002, seeking urgent payment of the disputed amount.
- The High Court upheld the contractor’s right to payment, emphasising the binding nature of contracts and the importance of cash flow in construction.
The Significance of ‘Pay Now, Argue Later’.
This principle is vital for the construction industry for several reasons, including:
- Maintaining Cash Flow: Construction projects involve complex supply chains and multiple subcontractors. Payment delays can have a big impact on cashflow which disrupt work schedules and threaten the financial viability of smaller businesses.
- Preventing Escalating Disputes: The ‘pay now, argue later’ principle encourages parties to address disputes promptly through defined adjudication processes, minimising the risk of costly litigation and project delays.
- Ensuring Project Completion: By safeguarding regular payments, projects are more likely to be completed on time and avoid budget overruns and project delays.
How Payapps Fits The Picture
Payapps can help construction companies manage their payment obligations with subcontractors
with greater ease:
- Streamlining the Payment Process: Payapps offers a centralised platform for managing
progress claims, statutory declarations, and payment approvals, ensuring transparency and efficiency. - Reducing Administrative Disputes: Our platform provides clear documentation and audit trails, helping to prevent disagreements arising from misunderstandings.
- Faster Dispute Resolution: In the event of a disagreement, Payapps can facilitate the exchange of relevant documentation and communication within the framework of the Construction Contracts Act.
Key Takeaways
The High Court’s ruling in New Zealand reminds all parties in construction projects:
- Contracts Matter: Carefully drafted contracts with clear payment terms to protect all stakeholders.
- Payment Delays are Costly: Withholding payments without a valid cause can have severe consequences for project schedules and finances.
- Technology is Your Ally: Digital platforms like Payapps streamline processes, reducing the risk of disputes and promoting efficient project delivery.
By upholding the ‘pay now, argue later’ principle and using tools like Payapps, construction companies can build stronger relationships, minimize disruptions, and create a more efficient and financially robust industry.
