Can I Suspend Work if I’m Not Being Paid?
Unfortunately, there are times when a contractor or employer breaches their contractual obligations or violates agreed payment terms – this is sadly not uncommon in contractual construction work. Most of the time in such situations, the contractor rightly seeks to suspend the work. After all, they should not be expected to work without being paid. However, problems can be encountered here if suspending work is not in accordance with the contract.
Where a contract is silent, laws are in place to protect contractors who suspend their work when they’re not paid. The laws can also allow them to claim damages and compensation as a result of having to suspend the work. However, to do this you must take the proper legal route when suspending work. If you don’t, you could be liable for considerable legal costs and damages. This can be the case even where the client wrongly withheld the payments or tries to terminate the contract.
The Housing Grants Construction and Regeneration Act 1996 lays out your rights as a subcontractor or contractor irrespective of the contract. Section 112 (explained below) details the right to suspend work in construction. It makes clear the procedures you should follow when suspending work for non-payment. There are additional conditions that you must satisfy as the party suspending work due to non-payment. These additional conditions are stated in Sections 110 and 111, and need to be met to comply with the law. Also, be aware that the Act doesn’t apply to every construction job – for example, any involving residential occupiers are excluded.
The legal complexity of this issue is why we highly recommend that you get legal advice from our specialists in construction law before suspending work. This way you can’t be counter-sued for failing to follow the correct procedures and will be eligible to receive any due compensation.
Below is Section 112 in full, detailing the right to suspend work in construction:
Section 112: right to suspend performance for non-payment
1) Where the requirement in section 111(1) applies in relation to any sum but is not complied with, the person to whom the sum is due has the right (without prejudice to any other right or remedy) to suspend performance of any or all of his obligations under the contract to the party by whom payment ought to have been made (“the party in default”).
2) The right may not be exercised without first giving to the party in default at least seven days’ notice to suspend performance.
3) The right to suspend performance ceases when the party in default makes payment in full of the sum referred to in subsection (1).
(3A) Where the right conferred by this section is exercised, the party in default shall be liable to pay to the party exercising the right a reasonable amount in respect of costs and expenses reasonably incurred by that party as a result of the exercise of the right.
4) Any period during which performance is suspended in pursuance of, or in consequence of the exercise of, the right conferred by this section shall be disregarded in computing for the purposes of any contractual time limit the time taken, by the party exercising the right or by a third party, to complete any work directly or indirectly affected by the exercise of the right.
Where the contractual time limit is set by reference to a date rather than a period, the date shall be adjusted accordingly.
To summarise, Section 112 shows that you may legally suspend work under two conditions. First, you need to have satisfied the requirements detailed in Section 111. Second, before ceasing to work you must give 7 days’ notice in writing to the contractor or employer. This part is very important – if you do not give them the stated notice, you can be held liable for damages. This fact remains even if you were not paid in accordance with the contract.
Subsection 3 shows that the right to suspend performance ends when the contractor or employer pays you in full. The payment may include an additional sum covering costs incurred during suspension. Getting legal counsel can help you ensure that you are repaid the full amount due for the work done and any additional costs or damages related to the suspension.
The final point in Section 112 details that the time period in which the work was suspended does not constitute a part of any contracted time limit. For instance, if the contract states that the work should finish within 12 months, a period of suspension of work (following correct procedures) lasting 4 months would not be counted as a part of those 12 months.
To conclude: it’s recommended that you definitely seek legal advice and opinion before suspending work due to non-payment. Your right to suspend construction work when you are not paid is certainly a leveraging tool, but ONLY if you correctly follow the procedures in place to protect you. Most cases are extremely complex and therefore require professional legal analysis to find the best course of action. One wrong step could end with you paying a fortune in damages and legal fees and cause many other problems. Before suspending construction work, contact our construction lawyers for advice.