If you are party to a construction contract and have not received payment of sums due to you, you may be able to suspend works under the contract.
Although there is no common law right for a party to suspend works, the Housing Grants, Construction and Regeneration Act 1996 (Construction Act) provides a statutory right for a party to suspend performance of its obligations under a construction contract in the event of non-payment.
This right is implied into every construction contract, even if the contract does not deal with the issue of suspension on the face of it.
Statutory right to suspend
Under the Construction Act, where the paying party has failed to make payment to the payee by the final date for payment, the payee has a statutory right to suspend performance of ‘any or all’ of its obligations owed to the party in default.
If you wish to exercise your statutory right in this respect, you must ask the following:
- Is my contract a ‘construction contract’? (If it is not, you will not have a statutory right to suspend under the Construction Act);
- Have I provided the party in default with at least seven days’ clear notice of the intention to suspend works? (This is a requirement under the Construction Act);
- Does my construction contract set final dates for payment? (If it does not, use the dates set out in the Scheme for Construction Contracts (England and Wales) Regulations 1998 – link;
- Do all of the works relate to “construction operations” as defined by Section 104 of the Construction Act? (Only works which are ‘construction operations’ can be suspended under the Construction Act);
- Has the final date for payment passed and is the sum still unpaid?
If you decide to exercise your statutory right to suspend under the Construction Act, it is crucial to remember that this right will end once the party in default pays the unpaid notified sum. It is also crucial to note that suspension under the Construction Act relates solely to non-payment and therefore cannot be used in response to a breach of contract other than non-payment.
Contractual right to suspend
If you wish to suspend works for other reasons, it is essential that you check your construction contract to see if there is a suspension clause. Such clauses often provide parties with a right to suspend for reasons other than non-payment.
If your construction contract does include a suspension clause, it is likely that this will outline the immediate consequences of suspension, how long a contract can be suspended for and what is to happen following the re-commencement of works after a suspension.
Consequences of suspension
Whether you suspend using the statutory rights provided by the Construction Act, or any contractual rights afforded to you by the contract, it is likely that you will also seek:
- An extension of time equivalent to any delay to the works caused by the suspension
- The additional costs associated with demobilisation and remobilisation
- Any preliminary type costs incurred during the period of suspension
