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Sub-Contracting Simplified: New working group to develop a 500-word style contract. 

Sub-Contracting Simplified: New working group to develop a 500-word style contract. 

FIS is working with legal expert Sarah Fox (famous for her 500-word approach to contracts) to create a simplified subcontract for FIS members to use.

Sarah describes herself as a recovering lawyer and her work is driven by the principle that we are wasting time, money and energy on paperwork that few users can understand.  Complex contracts and unclear processes are costing our sector profit, deals and relationships.

This very much chimes with the challenges that were identified in the Reading Report.  Sarah has spent 10 years putting her idea into practice and drafting UK construction contracts starting with just 500 words. At the heart of her work is a simple idea – simplification works. When you streamline deals and clarify terms you’ll save avoid conflict, sign deals quicker and be more efficient.

To kick us off, FIS is looking at drawing together an intrepid group of contractors who regularly sub-contract packages of work (as distinct from using Labour Only Sub Contractors to deliver work they are contracted to do) to develop a universal contract that will be available for all members to use.  Our aim is to develop this contract in a 2-hour online workshop.

If you are interested in getting involved, please email: iainmcilwee@thefis.org by 21 February 2025.

If you have any live legal issues or want advice around standard form contracts, don’t forget the FIS Legal and Contractual Toolkit is available here and has a raft of tools to support the FIS Community.

Notified Sums: More time to pay less?

Notified Sums: More time to pay less?

In the matter of Placefirst Construction Limited -v- CAR Construction (North East) Limited (2025) EWHC 100 (TCC), Hill Dickinson successfully acted for Placefirst Construction Limited (“PCL”) in its claim for declaratory relief and the consequential nullification of an adjudicator’s decision requiring PCL to pay a notified sum. 

What is a Notified Sum?

Given the recent finding that technical payment (often referred to informally as “smash and grab”) adjudications accounted for around 63% of all claims referred to adjudication in recent years (2024 Construction Adjudication in the United Kingdon: Tracing trends and guiding reform (Kings College London, the Adjudication Society)), those in the industry will be all too familiar with the smash and grab concept and what constitutes a “notified sum”

This notified sum regime has been the subject of countless adjudications and subsequent litigation in the TCC and beyond. 

The facts in PCL vs CAR

The key facts of the case are as follows:

  • PCL employed CAR to carry out certain works pursuant to an amended JCT design and build 2016 form of subcontract (“the Contract”).
  • As per the terms of the Contract, CAR was required to submit an interim application for payment (“AFP”) no later than the 25th of each month.
  • PCL was required to issue a payment notice not later than five days after the “due date” (as defined by the Contract), with the amount as specified in such payment notice to be paid on or before the “final date for payment” (as defined by the Contract).
  • PCL was also entitled to issue a pay less notice no later than two days before the final date for payment.
  • On 24 July 2024, CAR submitted an AFP by email for works valued up to 31 July 2024.
  • On 31 July 2024, PCL sent an email enclosing a “Payless Notice” and a separate excel document titled “Valuation 30”, contending that no payment was owed to CAR.
  • It was averred by CAR that a payment notice had not been issued, and that the pay less notice had been issued by PCL in advance of the date when it could have properly been issued under the Act and the Contract. 
  • It was therefore CAR’s position the amount claimed in CAR’s AFP (i.e., the notified sum) was due and payable on the final date for payment.
  • PCL’s position was that it had issued both a valid and effective payment notice and pay less notice.
  • The dispute was referred to adjudication, with the adjudicator deciding in favour of CAR.
  • PCL subsequently issued part 8 proceedings seeking declarations that, amongst other things, the Valuation 30 document enclosed with the email on 31 July 2024 constituted a valid and effective payment notice and that the pay less notice issued on the same date was equally valid and effective. 
  • CAR thereafter issued its own proceedings and made an application for summary judgment to enforce the adjudicator’s decision.
  • At a joint directions hearing convened by the court, PCL were successful in arguing that, in line with established principles and the TCC Guide, its claim concerned short and self-contained issues which could be determined without the need for disclosure or witness evidence, and on a summary judgment application, such issues were those that it would be unconscionable for the court to ignore.
  • It was therefore determined by the court that it was appropriate for its part 8 claim to be disposed of at the same time as hearing CAR’s application for summary judgment.

The key issues

The key issues for the Court to determine were as follows:

Was the payless notice valid and effective?

  • Pursuant to s110B(4) of the Act, a payee’s application for payment will be regarded as the default payment notice in circumstances where a payment notice is not given by the payer, that is if (as in this case) the contract permits or requires this AFP to be made before the date on which this payment notice can be given.
  • In deciding whether the pay less notice issued by PCL was valid and effective, the Court was required to determine at what point an application for payment would be regarded as the payee’s notice in default, and therefore in respect of s111(5)(b) of the Act, when a pay less notice could be issued.
  • It was submitted by PCL the effect of s111(5)(b) and s110B(4) of the Act when read together was that, if an AFP was to take effect as a payee’s notice in default, such application would take effect as the default payment notice on the date when it was issued (meaning that effectively the date of a default payment notice was contingent on whether or not a payer notice was issued). 
  • The contrary position advanced by CAR was that, as s110B(2) permitted a payee (default) notice to be given at any time “after” the date on which the payment notice was required to be given, the AFP would not be “deemed” the default payment notice until after this date, meaning the pay less notice was invalid, as it was issued before this point in time.

Was the Valuation 30 document issued with the payless notice sufficient to constitute a valid payment notice?

  • In determining this point, the Court was required to consider, as contended by PCL, whether the Valuation 30 excel document attached to PCL’s email on 31 July 2024 was intended as a separate document (i.e., not merely a document supporting the pay less notice attached), and if so, whether in substance, the Valuation 30 document in its entirety, or any of the worksheets within, which included a “payment certificate”, comprised the payment notice, and that such payment notice could be served simultaneously with a pay less notice and under the cover of the same communication.
  • CAR raised various arguments in support of its contention that Valuation 30 did not constitute a valid payment notice, with its position in essence that this document was purely subsidiary (and its purpose being to provide the supporting detail only) to the pay less notice which it alleged had been issued prematurely, rendering it invalid.

The decision

Insofar as whether PCL had issued a valid and effective pay less notice, the court found that there was nothing in the Act which provided that an AFP is deemed or otherwise treated as a payee notice in default only after the period for the payor to give a payment notice had elapsed. Instead, where no valid payment notice is served, any such AFP is to be regarded as a payee notice in default, and a pay less notice is required to be given not before the date of the payee notice in default (i.e. the AFP).

In practical terms therefore, the only requirement in respect of the timing of a pay less notice (where a payment notice has not – or is alleged to have not been served) is that the pay less notice is issued after the date of the AFP and not before. 

As to whether, in any event, PCL had, at the same time, issued a valid payment notice, the Court adopted a “substance over form” approach in ultimately concluding that it had done so, whilst agreeing with PCL that there was nothing to prevent it from serving both notices at the same time. It noted in particular that:

  • There was no requirement for Valuation 30 to refer to itself as a “payment notice”. In this case, Valuation 30 was described as a “sub-contractor payment certificate”;
  • There is no requirement that a payment notice has to state expressly that the sum stated was that which was considered due at the due date;
  • A payment notice can state a negative sum due and is not required to state a zero sum (notwithstanding this would not create an obligation on the payee to pay that negative sum).

With the Court determining that PCL had served both a valid payment notice and a pay less notice, it succeeded with its part 8 claim in all respects, meaning the adjudicator’s decision was void and unenforceable.

Commentary

If a payer has, on any objective analysis, sought to comply with its obligations to give the required notices in response to an AFP the Court will not take an “unduly legalistic interpretation of [the] requirements [of the Act] (Para 89 judgment)”. Essentially, the Court adopted a sensible approach in not penalising PCL for a perceived technicality. 

Given the draconian consequences which may follow in the absence of a paying party serving the required notices, the Court’s clarifications, and its adoption of a “substance over form” approach are both welcome. Our view is that the Court’s focus was very much on intent and clarity. 

The Court also noted, perhaps significantly, that a payment notice and a pay less notice is largely the same in terms of content and that both notices could be served at the same time (although serving both is not always necessary).

This case also serves as a useful reminder that, in certain circumstances and subject to certain conditions, including the court’s own availability, the Court will intervene and make determinations which prevent the enforcement of an adjudicator’s decision which is plainly wrong.

David Crone, Adam Kitchin and David Banks acted for PCL in these proceedings.

For further details on our property and construction law services, please contact us or a member of our property and construction law team.

Competition Law in Construction

Competition Law in Construction

The Competition and Markets Authority (CMA) continues to monitor anti‐competitive behaviour in construction and recently launched an investigation into potential bid rigging by several companies providing roofing and construction services. It has also extended its investigation into whether seven housebuilders exchanged competitively sensitive information.

Through FIS Members can access Build UK updated guidance on preventing anti‐competitive behaviour in construction, with the support of Wedlake Bell LLP. It explains the most common violations of competition law, such as cartel activities and cover pricing, and includes a number of previous CMA investigations into the industry. It is designed to help businesses and directors comply with their legal obligations by outlining the risks and the steps they should take.

Crown Commercial Service calls for suppliers to be certified to the Common Assessment Standard

Crown Commercial Service calls for suppliers to be certified to the Common Assessment Standard

Crown Commercial Service has confirmed that suppliers applying to its new Construction Works and Associated Services Framework, worth up to £80 billion, must be certified to the Common Assessment Standard developed by Build UK. The framework will run from October 2026 until October 2034, and the contract notice is now available.

With a growing list of organisations across both the public and private sectors using the Common Assessment Standard, members of the supply chain only need to obtain certification once from any of the Recognised Assessment Bodies. Companies keen to see a reduction in the bureaucracy of pre‐qualification should review the different certifications they hold to see if they have the Common Assessment Standard from more than one Recognised Assessment Body and whether that is required for any reason.

Help eliminate waste in Duplication of Pre Qualification Questionnaires
As part of the FIS Responsible No Campaign, FIS is also looking at the current failure for wholesale adoption of the Common Assessment Standard.

FIS is encouraging members to advertise their support for the Common Assessment Standard and adopt a Responsible No when they are confronted with behaviours and processes that undermine productivity, safety or responsible commercial practice.  To this end we are encouraging members to use a Responsible No when asked to complete multiple PQQs.  We accept that this is difficult in a commercial tender situation and time is often too tight, but we have prepared a short email that we suggest our members send to their client to help raise awareness of the efficiencies that the Common Assessment Standard brings.  This email template is available here Common Assessment Standard Template Email.

If companies are failing to adopt the Common Assessment Standard, please email info@thefis.org and we will follow-up independently (all information will be treated in the strictest confidence ensuring no member is named or disadvantaged in any way by our follow-up).

FIS updated resource: Collateral Warranties

FIS updated resource: Collateral Warranties

FIS has updated its guidance on Collateral Warranties, which members can access for free here..

A collateral warranty is a contract, that is associated with another contract (such as a construction contract, a sub-contract, or design consultant appointment), and is entered into between the person employed under the contract to provide works or services (the contractor, subcontractor or design consultant) and a third party who either has or acquires an interest in the project to which the contract relates.

A collateral warranty is therefore a form of security against the risk that any of the party(ies) between the beneficiary and the specialist contractor becomes insolvent.

FIS Contractual and Legal Toolkit

FIS members can access an extensive range of support services to help manage the complexities of contracting and supplying products into the construction market.

Identifying risk and recommended negotiation positions

Identifying risk and recommended negotiation positions

FIS has produced guidance to support members in identifying and responding to onerous contractual terms. Prepared for specialist contractors, it is a summary of the typical risks and industry recommended compromises to look out and negotiate when engaging in a contract with clients or main contractors.

The guidance supports the FIS Responsible No Campaign, which is a targeted approach from FIS to challenge negative behaviours and empower the supply chain to challenge situations where the transfer of risk through contract is not reasonably apportioned or clear. 

Whilst FIS continues to recommend members use and work on unamended contracts (rationale set down in our guidance published last week – Using Standard Form Contracts).  However, the Responsible No Campaign approach recognises that we have some way to go and attempts to bring more standardisation where amendments are inevitable based on industry compromise position recommended by a relevant authority.  This is what this document helps our members do.

FIS Contractual and Legal Toolkit

FIS is continually updating its Contractual and Legal Toolkit to support members in identifying and apportioning risk. Part of this Toolkit is a subsidised Contract Review service. You can find more information  on how to access the service here.