Subcontractors – Do not be afraid to demand payment from your client(s)

Over recent weeks, I have had several conversations with subcontractors, whom I will not mention, and all of them have been asking for advice about what they should do, as their client’s had not paid them.

We all know that this is not an unusual occurrence in the construction industry; in fact it is pretty much commonplace on most construction projects.  However with profit margins on projects almost non-existent, a subcontractor’s leeway for receiving payment later than they should is simply a no-no.  Therefore it is all the more important to get paid on time and to get paid what has been claimed for in an application for payment / final account.  This will help to maintain cash flow and keep the company trading.

Knowing this, why do subcontractors choose to not enforce their contractual right to be paid?

“We are worried we will damage our relationship with them (the client)”,

“They (the client) said on a previous job that if we take legal action then we will get no more work, so we don’t want to do it on this job either”,

“They said they haven’t been paid so they can’t pay us”.  

These were some of the answers to the question that I asked, “Have you considered enforcing the contract?”

My response to them was simple, you have entered into a contract with them to supply and install materials, plant & equipment for a price.  Their part of the contract is to pay you the agreed price, for these works, unless varied under the terms of the contract.  You have fulfilled, or are fulfilling your part of the bargain, however they are not.  They are in the wrong, not you; therefore you should be enforcing your contractual right to receive payment.

These subcontractors’s took my advice; in the majority of instances a letter was sent to their client, which gave the statutory 7-day notice to suspend all or part of the works (under the LDEDC Act 2009). Within 7-days the subcontractors received payment, and in most cases their client actually apologised for the misunderstanding!

If times are that hard in your business and you simply cannot wait for a payment, which is already overdue, you must enforce the contract.  I have spoken to too many business owners when it has been too late; they have all regretted not enforcing the contract when their payment(s) have been late.

Ask yourself this question; can you afford to be another business that wishes they had enforced the contract? I would think the answer is NO.

Make sure you act now.

 

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