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Withholding Payment © Daniel Atkinson 1999
Right to Withhold Payment - Section 111 Section 111(1) of HGCR Act 1996 makes the giving of notice a condition precedent to a right to withhold payment beyond the final date for payment for construction contracts under the Act. Such rights include the right of set-off. It is not clear whether it includes the right of abatement of price, or whether that right is to be exercised under Section 110(2) only.. Section 111(1) provides that the notice in Section 110(2) may suffice as notice of intention to withhold payment if it complies with Section 111. Section 110(2) notice is 5 days after payment becomes due. Section 111(2) defines effective notice. Such a notice must specify:
Section 111(3) provides that the parties are free to agree what the prescribed period is to be. In the absence of such agreement, the period shall be that provided for by the Scheme for Construction Contracts. In Palmers Limited v ABB Construction Limited (Aug 1999) TCC ABB had not given notice of set-off in accordance with Section 111 of the Act, since they had not stated the amount they proposed to withhold. It was held that since the final date for payment had passed, no effective notice of withholding could now be served. It was held that the sum applied for should be paid and that it could not now be the subject of any set-off by ABB. This part of the decision emphasises that a party can only raise issues of set-off against an applied payment, within the periods provided by the Contract. If such notice is not given, then set-off cannot be raised in an application for summary judgment for payment on the application. The Scheme for Construction Contracts Paragraph II.10 provides that the length of the prescribed period in Section 111(3) is 7 days before the final date for payment.
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