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Is time ticking on your right to be paid?
As you are probably aware, there are time limits known as “limitation periods” within which claims governed by English law must be brought, after which the right to bring a claim can be lost. The limitation period for a claim for breach of contract is six years from the date of the breach. However, it is not always clear from exactly what date this time limit starts to run.
Unless the parties to a contract agree otherwise, the position is that the limitation period on a claim for payment for works or services starts running from the date that those works or services were carried out. But what is the position where the contract provides that payment for that work only becomes due upon the contractor raising an invoice? What if the contractor only raises an invoice two years after the work was completed and that invoice is not paid? How long does the contractor have to bring a claim for breach of contract in respect of the non-payment of that invoice? Well, it would seem that the breach of contract occurred when the invoice wasn’t paid, so surely the contractor would have six years from the date of non-payment to bring a claim? But that would mean that the contractor would have eight years from the date that the work was completed in which to bring a claim, which would perhaps be rather unfair on the paying party?
The High Court clarified the position in a case decided earlier this year. The Court held that even where there are contractual terms relating to payment for work or services which provide that payment only becomes due once the contractor has raised an invoice, the limitation period on the contractor’s right to issue proceedings for non-payment of that invoice will still run from the date that the work was completed, not the date that the contract says the invoice should have been paid.
The decision serves as a reminder to contractors of the serious consequences that can arise as a result of delays in raising or pursuing accounts. Six years may sound like a long time, but it is not unknown for contractors to fail to issue final accounts within this period, particularly where perhaps there are ongoing disputes between the parties relating to the works.
If you have any queries about disputes, please do not hesitate to contact me on 01245 453821 or alternatively you can email me at email@example.com.