Section 112 of the HGCR Act 1996 creates a statutory right to suspend performance where a sum due under a "construction contract" (as defined in the Act) is not paid in full by the final date for payment and no effective notice to withhold payment has been given. This is a right of the person to whom the sum is due.

Since the Act creates a structure of payment in which there is a statutory right to interim payment, and requires notices to be given if the full sum is not to be paid and/or rights to withhold payment are exercised, it is entirely logical that there should be a right to suspend work if the payment structure is not observed. This does not mean that the issues which give rise to disputes on payment are resolved by the Act - they are not. What the Act does is to ensure that the payer gives reasons for his non-payment, so that the issues in dispute can be identified.

In keeping with the structure of the Act, Section 112(2) requires that the payee gives notice of intention to suspend and Section 112(3) and Section 112(4) deals with the consequences on the administration of the contract when payment in full is made. The provisions of Section 112 are as follows:

• the right may not be exercised without first giving the party in default at least 7 days notice of intention to suspend performance stating the ground or grounds on which it is intended to suspend performance (Section 112(2));
• the right to suspend performance ceases when the party in default makes payment in full of the amount due (Section 112(3));
• any period during which performance is suspended in pursuance of the right conferred by this section shall be disregarded in computing for the purposes of any contractual time limit the time taken, by the party exercising the right or by a third party, to complete any work directly or indirectly affected by the exercise of the right (Section 112(4));
• where the contractual time limit is set by reference to a date rather than a period, the date shall be adjusted accordingly (Section 112(4)).

Any party using this provision will have to ensure that "a sum due" is correctly identified, a correctly notified set-off would mean that payment of the full sum due need not be made.

There is also a problem for the party who suspends work in that their entitlement to time ceases when full payment of the amount due has been made. There would appear to be no allowance for time taken to set up to restart the works, for example a problem with non-availability of labour.

As the period of suspension is to be disregarded in determining the time for completion, the Act provides for a statutory extension of time, but will the injured party have the obligation to use reasonable endeavours to minimise any delay caused?

The Act makes no reference to the right of recovery of loss that may be incurred as a consequence of the suspension.

It is to be noted, however, that the statutory right to suspend under Section 112(1) is stated to be without prejudice to any other right or remedy. It does not therefore exclude other remedies. The right to payment is a contractual right by reason of Section 109(1) of the Act for construction contracts to which the Act applies. It is suggested that non-payment in accordance with Sections 109-111, would be a breach of contract, since the relevant provisions of Sections 109-111 are implied by statute into the contract, if not expressly stated. The payee will therefore have available remedies in damages and extensions of time for breach contact in the normal way. Damages for the consequences of suspension are within the first limb of Hadley -v- Baxendale within the contemplation of the parties and would be recoverable it is suggested.

A party who wishes to exercise the right to suspend performance, runs the risk that their suspension will be regarded a failure to carry out the works regularly and diligently and may be treated as a repudiation of the contract, if in the particular circumstances no such right actually exists.