Is late payment by the employer a breach of contract by the employer under clause 60.1(18)? If so and this causes the contractor delay / disruption which can be demonstrated would the contractor be entitled to a CE in addition to interest on late payment?


Late payment could be treated as a breach of contract but I believe that it has to be the essence of the contract. The essence must be that getting piad on time is completely essential, and is critical to the work you have agreed to undertake when you signed the contract.
Does this apply to nec3? In nec3 you do have the right to interest on late payments clause 51.2. and termination if a payment due has not been paid within 11 weeks.

The point I think you are raising is that the late payment is stopping the work proceding because you are reliant on the payments to progress the works? Not sure that late payment would be considered a material breach of contract. Will be interested to see other comments on this point.

Whether or not a breach, i think it would be very difficult to “prove” your actual cost that result from the non-payment. Whilst you may feel that the non-payment has specifically led to certain knock on effects that may be just because that is how you set up your business. Whilst unfair to be paid late, it may be considered unfair that the Employer should then pay certain knock-on costs that he had no knowledge of.

You get recovery of interest on any late payments which should be included within the next assessment, but not much else specifically under the contract. Any other such valid claim would be through other sources of law I suspect outside of the NEC contract.

Taking things a strep at a time. Does the Employer have an obligation to pay an amount assessed by the PM. The answer to that must be yes (subject to any deduction the Employer may be entitled t make). If then there was an obligation that is not complied with that must be a breach. The breach is not covered by any of the other CE’s so it would be covered by 60.1(18). There is, so far as I am aware, no requirement for there to a fundamental breach.

Turning then to practicalities that could give rise to time or cost consequences. Perhaps you cannot fund the works without the cash flow which causes knock on delay and cost in the supply chain. Perhaps you face financing charges in addition to loss of interest. Perhaps you have to reduce labour or pay extra to retain labour. There is then the potential for Actual Cost to be incurred although I agree with Glenn that it is likely to be difficult to track this to the CE rather than to other business related causes.

Dealing lastly with Glenn’s point on fairness. I don’t think this really enters the equation. Under English law, generally, you take the party as you find them. If they are financially weak and a breach pushes them over edge then, as long as the consequences are a result of the breach, they will be recoverable.

That said, you may well find that a court or adjudicator would find that interest under the contract is a complete remedy for late payment.