ednesday, March 02, 2022 / 10:00 AM / by Osinachi Nwandem of Aelex / Header Image Credit: Aelex

When contractors are engaged in construction projects, the employer undertakes to make payments to the contractor in instalments and through the mechanisms provided under their contract. One important mechanism for payment in a construction contract is the contractor's payment application.

The payment application is important as it assists the employer in finding out the value of work done and the amount due to the contractor. Typically, the payment application will show the total value of work completed and the contractor's amount. Usually, the contract will require that the contractor submits its payment application every month or after the conclusion of agreed milestones.

Like every construction contract, the FIDIC Suite of Contracts 2017¹ and the General Conditions of Contract for the Procurement of Works in Nigeria, 2011 (the GCC) have provisions governing the contractor's payment application.

This article will examine two vital lessons crucial to contractors making payment applications.

Lesson 1:

The contractor must ensure that the payment application complies with the requirements provided under the contract.

The contractor will need to ensure that its payment application is clear in substance, form, and intent, and relates to the due date it was made. Specifically, the contractor must ensure that:

a)   The contractor submits its payment application within the period stated in the contract:

Under the FIDIC suite of contracts 2017, the contractor will need to submit its payment application within the period stated in the contract². Where the contract does not state any period for submission, the contractor will need to submit its application at the end of every month³.

b)   The contractor's payment application is in the content and form recommended under the contract:

Clause 14.3 (i) - (x) of the FIDIC Suite of Contracts 2017 lists the items the contractor will need to include in its payment application. Under the GCC 2011, the contractor will need to include all the estimated value of the work executed within the period less the cumulative amount certified previously⁴.

c)    The contractor communicates its payment application in the mode prescribed under the contract:

Under the GCC 2011, all communications between the contractor and employer are meant to be in writing and delivered to the address provided in the contract⁵. This means that the contractor's payment application must be in writing. The GCC 2011 defines writing to include any hand-written, type-written, or printed communication including telex, cable, and facsimile transmission⁶.

Under the FIDIC suites of contract 2017, payment applications sent via electronic means such as email exchanges are valid in addition to the other forms of communication⁷. The contractor therefore must allow its payment application to conform with the mode approved by the contract.

Where the contractor fails to make its payment application under the contractual requirements, the contractor will not receive any payment. We can see an example of this consequence in the English case of RGB Plastering Ltd v. Tawe Drylining & Plastering Limited⁸.