POOL & SPA INDUSTRY
How To Reduce The Risk Of Non-payment Unfortunately, securing full payment for completed projects isn’t always a given, but there are ways to minimise their problems as Paul Slinger, a Partner and member of Wright Hassall LLP’s Construction & Engineering Department explains
G
etting paid is, in most cases, the most important aim of a business. All too often it proves to be a frustratingly difficult goal, and any organisation will have a tipping point which, if surpassed, will lead to insolvency. Most organisations choose not to give credit (often because it is such a fight to obtain it themselves), but in circumstances where some customers seem keen to take it anyway, how can you minimise the risk of late or non-payment and take control of the payment process? To achieve the greatest certainty of obtaining payment, a clearly identifiable contract with terms and conditions should apply to each sale or transaction, and it should deal with both the amount and time for payment. That is only ‘one side of the coin’ however because it should also be clearly recorded exactly what is to be provided in return for payment and when. Many non-payment or reduced-payment scenarios arise because the paying party disputes that it has received what was expected, so allowing any grey areas in terms of scope of deliverables opens the door to time-consuming and potentially costly disputes. It goes without saying that to secure full payment, the contract must have been complied with. If you cannot meet your promises, including the requirement to meet any third-party standard or specification, then not only might you not get paid, but you could end up being liable for damages to somebody too. If the full contract price cannot realistically be paid at the point of agreeing on the contract (or indeed if it is not even known), then an initial payment on account can minimise the initial risk and also quickly establishes if the customer does indeed have
the financial wherewithal to proceed. It is worth a discussion with your insurance broker about whether credit insurance could offer your business some protection too. If debts do start to arise, establish why as quickly as possible. If somebody alleges that there has been a breach of contract, that can and should be addressed before it becomes a larger problem. If no reasons are given, then it makes any later attempt to argue such a breach look more tenuous. If you are unable to contract on your terms and conditions, which is often the case with larger purchases, then make sure that you understand all of the terms and conditions that the other party wants to impose. Beware in particular of ‘condition precedent’ clauses which, if not strictly complied with, will prevent you from being paid; and retention clauses that allow them to retain a percentage of your money unless and until particular conditions are met. Beware also of what lawyers like to call “the battle of the forms” where the parties to a contract fire salvos of terms and conditions at each other in the hope that theirs will prevail. The outcome of this is always fact-dependent, so it is a high-risk strategy for anyone to assume that they have already ‘won’. The above points for consideration are
Many non-payment or reduced-payment scenarios arise because the paying party disputes that it has received what was expected, so allowing any grey areas in terms of scope of deliverables opens the door to time-consuming and potentially costly disputes” 34 October 2019 SPN 34_SPN_October_19_Wright_Hassall.indd 34
true of any contract for the supply of goods and services, but if you are carrying out a construction project, then there is further legislation in the form of the Housing Grants, Construction and Regeneration Act 1996 (as amended). This act contains mechanisms to assist you in receiving regular interim or stage payments (including a right to suspend your work until paid); securing a final payment; and also contains an adjudication regime which is a quick and relatively inexpensive way of securing payment for the works done. This legislation exists because the UK government has realised that cashflow is the lifeblood of the construction industry and contractors / sub-contractors often have to front-load investment in work and materials and then wait for payment. If a true impasse does arise, then experience dictates that it is better to grasp the nettle sooner rather than later, when there is less at stake and when firm positions have not yet been taken. The early threat of court proceedings, statutory demands or winding-up petitions, despite being muchused, can often be highly counter-productive. Establishing some key points and principles for discussion instead can give a relatively consensual route to resolution. Working with lawyers and relevant experts can identify strengths to make the most of, and weaknesses to avoid. Adjudication, arbitration and court proceedings will ultimately determine who is right and can give an enforceable judgment leading to payment, but will always constitute a gamble, so should usually be a route of last resort. Wright Hassall 01926 883049 www.wrighthassall.co.uk
www.swimmingpoolnews.co.uk 04/10/2019 17:41