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Understanding how your contract gets you paid.

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  • Understanding how your contract gets you paid.

    Tips on understanding key contract clauses that get you paid.

    What you need to understand…

    What do you get paid for?
    Understand how your contract works, this is often a monthly payment based on measurement of the quantities you have installed. There should be a clause in the contract, something to the effect of ‘Measurement and Evaluation’, which will describe how it works. Other types of contract could also allow for payment based on specific milestones achieved, or could be based on actual man-hours expended and materials used. It’s just important you understand which it is.
    How much do you get paid?
    Understand how much you are going to get and when. There should be a clause related to ‘Contract Price and Payment’. This might refer to a bill of quantities and a schedule of rates. It might refer to a schedule of milestone payments.
    How do you ask for it?
    The payment clause in the contract should specify how you notify the client of what you believe you are entitled to. This will usually involve you submitting a payment certificate or an invoice. Make sure you understand what back up you need to provide and make sure it is accurate, don’t give them excuses to knock it back. Also take note of what the contract says about submitting it, is email ok, or is a letter required? Who do you send it to? How many copies etc? Look up all the relevant clauses and highlight them for reference.
    When do you get paid?
    The contract should state how long the Client has to review your invoice and notify you of any disputes or deductions they intend to take. It should also state valid reasons the Client may have that allow them to withhold the payment, take note of these and avoid them. Once they have accepted the invoice then how long do they have to pay you? Take note and keep track of the dates. Get letters on record as soon as a payment is late.
    What happens if you don’t get paid?
    Check your contract for clauses related to ‘delayed payment’. You may be entitled to charge them interest on the overdue monies. Get letters on record as soon as a payment is late. Go back and take another look at the contract, what leverage do you have?
    What can you do about it?
    Common clauses that you would like to see in the contract – ‘Right to suspend the works’ and ‘Right to terminate the contract’. As soon as payment is late make sure you have a letter in voicing concern you haven’t received payment. If there is a suspension clause check what it says: There will usually be a timeframe mentioned. i.e ‘After 14 days of non-payment you have the right to suspension’. Then if non-payment continues, cancellation is the nuclear option.
    A letter referencing the suspension clause will often get the Client a little worried and may give them a sense of urgency. Be careful – If they have withheld payment for valid reasons and you suspend then you could get into a battle related to the costs of the suspension, downtime, schedule over-runs etc. We hope it doesn’t get that far. I find the best route is frank, open and honest discussion face to face and in recorded meetings, but always get your letters in place in case they don’t follow through with any promises.
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