How to get Paid
The electrical industry had the highest value of claims for non-payment and the second highest number of claims in Australia in September 2018. Figures from NCI Trade Credit Solutions identified 11 gross debt claims totalling $2,485 million by the electrical industry compared to 29 claims of a total gross debt value of $1,189 million from the building/ hardware industry.
The reasons why the electrical industry is in this predicament can be partly connected to the need to institute solid processes to ensure payment.
What can you do to ensure you get paid?
- Understand the security of payment legislation within the state you are conducting business
While the security of payment legislation differs in each state and territory and there are more changes yet to come, it is imperative that contractors know how the security of payment legislation can be used for their benefit in any state in which they are conducting business. Ensuring your staff have a good working knowledge of how to use the security of payments system is essential. However, even more essential is making sure you have proper contracts and systems in place within your business, so you can maximise opportunities to be paid.
- Ensure you have proper written contracts
If you do not have proper written contracts, you are much more likely to run into disputes which end up damaging your client relationships. Lack of a written contract can also be very detrimental to your ability to use your rights within the security of payments legislation; do not forget that the terms upon which you have agreed to work can be set even before you sign a contract.
For example, if a client asks you to provide a quote in the tender document or request for price then generally this will be on their standard terms, once you give a price and they accept, you will be bound by those terms.
For this reason, we recommend that when you respond to a request for tender or quote, you specify the prices submitted are subject to your standard terms and make sure you actually have these. Utilising your own standard contracts when you are the sub-contractor or contractor means you are in control and have more certainty and your staff will also understand the contract terms. This will lessen ambiguity and room for error in administration of invoicing or payments.
Having properly drafted, written contracts improves your chances of getting variations approved, getting extensions of time, being paid on time, being paid fair value and being able to use the security of payment laws successfully.
- Identify nasty clauses and negotiate changes
If you are unable to use your own standard contract. Consult your lawyer to identify any potentially nasty clauses. Some are obvious but surprisingly often overlooked
For example:
- time bars
- multiple unrealistic requirements before can invoice
- indemnity clauses
- restricted rights to claim variation
- restricted rights to extensions of time
- termination for convenience
- latent defects/ground conditions – included
- deemed acceptance of site and other’s work
- obligations to make good other’s work
- right to seize and use your P&E
- outrageous LD’s
- deeds of release which release all obligations
Negotiating changes
You have the right to negotiate changes to contracts, but this needs to be done before terms are set and ideally with your own lawyer rather than the builder’s lawyer. Consult your own building and construction lawyer about what changes could and should be sought and how to prioritise those changes.
Contact myself or one of Cornwalls Building and Construction team if you have contractual concerns. Cornwalls offer a free legal advice service for MEA members; the first 20 minutes of a phone consultation is provided free of charge. Cornwalls also provide free solicitor’s letters of demand for Master Electricians members for outstanding debts over $550 (excl. GST). You will be pleasantly surprised how often the debts are paid… and how quickly.