Hi, while my coffee is being made I will remind you how the payment process under a 'construction contract' works by using the analogy of different sized coffee cups. This is particularly relevant because labour, material and plant costs continue to rise and businesses have to manage their cashflow to avoid failing in 2023. Unfortunately, I still come across projects where the right notices have not been served by the right date and one party ends up paying far too much.

So, the coffee cup reminder over the payment process is (minus the video) as follows:

• The Venti Cup (24fl. oz) - first, the party seeking payment (typically a Contractor, Sub-Contractor, or Consultant) will be required to make an application for payment on a date specified in the parties' contract. Assuming, for the sake of argument, this is the 1st day of each month and we are using the JCT D&B form of building contract term this is 'the Interim Valuation Date'.

This Venti cup is the size of coffee the Contractor wants that month and under the JCT form the Contractor is 'due' his Venti Cup of coffee 7 days after the Interim Valuation Date. This is the 'due date' which, based on an Interim Valuation Date of the 1st of each month, gives a 'due date' of the 8th of the month, i.e. 1 plus 7.

• The Grande Cup (16 fl. oz) or Tall Cup (12 fl. oz) - next, the paying party (i.e. those up the payment chain such as the Employer) are to give a 'payment notice' within a specified period. Under the JCT form this is typically 5 days after the 'due date'. In our example, this would be by the 13th day of the month, i.e. 8 plus 5.

If, therefore, the Employer considers a Venti cup of coffee is far too much for the Contractor (one must look after the health of others), he can tell the Contractor he will only get a Grande or Tall sized cup of coffee that month. But some Employers (or their agents) forget to tell the Contractor, i.e. they don't give a 'payment notice', which can entitle the Contractor to a Venti coffee even if he should only be getting a Tall coffee.

In some cases, the Employer might decide the Contractor has already received too much coffee because he got a Trenta Cup (31fl. oz) last month and no more coffee is due this current month. If that is the case, the Employer (or his agent) should tell the Contractor it gets no coffee cup this month, i.e. 'nil'.

• The Venti Cup returns - if no 'payment notice' is given the Contractor will be entitled to demand a Venti cup of coffee. Under the JCT form this will be 14 days after the 'due date', i.e. on the 22nd of each month, and this is regardless of whether the Contractor is entitled to a Venti sized coffee or not.

But not all is lost. The Employer can still reduce the Venti to a Grande, Tall or Espresso (3fl. oz) sized coffee by serving a second notice.

• The Grande or Tall Cups return - the Employer has a second opportunity to ensure the Contractor does not get too much coffee by serving a 'pay less' notice. However, he must tell the Contractor it is getting a smaller sized coffee by the agreed date. Under the JCT form this is not less than 5 days before the 'final date', i.e. by the 17th day of the month.

As with the 'payment notice', the Employer might decide the Contractor should get no cup of coffee this month at all, i.e. 'nil', and it should say this.

Sadly, some Employers and/or their agents don't give a 'pay less' notice either. If this happens the Contractor is entitled to its original Venti Cup of coffee. Where this happens, the solution is either to 'reset' the position through the following month's payment cycle or go to adjudication to argue over what size of coffee cup (Trenta, Venti, Grande, Tall, Espresso or none) the Contractor is entitled to. But adjudication is a costly and uncertain process and the best solution is to ensure you employ a top-class barista to serve the correct size of coffee cup by the specified deadline.

The above dates assumed the JCT D&B form of building contract was used but this not always the case. So, if you are working under a different form of construction contract please do check when you need to say what size of coffee cup (if any) is due that month. 

My thanks go to Mr Hunt (aka Mr Bean) for his idea of explaining contractual matters by way of coffee cups. That all said, I still don't know what a flat white is and I did not know (until doing my research) that one could get a 31fl oz cup of coffee called the Trenta. Personally, at my age I will avoid that otherwise I will be spending far too long in the loo.

A belated happy New Year to my handful of readers and rest assured, more articles will follow in 2023 but minus the coffee cups.