Contractors' Questions: Does late payment void my contract?

Contractor's Question: My contract direct with a consultancy says when I invoice them for payment they will pay me within 30 days.

They have never made this 30-day window and I have had to wait more than three months to get paid. I complained to the consultancy, citing the payment clause, but they said that their 30-day commitment was made "before the economy went bad." They also added that they "can't really do that [pay within 30 days] anymore," and told me that it's better for them to pay me once the end-client/buyer has paid them.

As we have both signed the contract, is there any way I can legally force the consultancy to pay me within 30 days of me invoicing, as my contract with them states? Or is there a quicker way for me to receive payment without resorting to such a formal confrontation?

Expert's Answer: The statement - we or I "cant really do that anymore" works both ways – I suspect you can't either - that is; wait 90 days for payment. On the basis of what you say, they are in breach of the contract. The contract may have some provisions governing what happens in case of breach, and you should check.

Otherwise, consider warning them that if they do not bring things up to date and settle with you by a specific date, then you will regard yourself as being at liberty to terminate on the grounds of their breach. There may also be a right to claim damages for the breach – I would need to review the contract itself to form a view on that.

Unless the contract has a specific provision for interest on late payments, you may also be entitled to fixed payments and interest under the Late Payment of Commercial Debts (Interest) Act 1999. The fixed payment is £70 for an invoice between £1,000 and £10,000, and interest is at 8.5%.

The expert was Roger Sinclair, legal consultant at contractor advisory Egos .

Friday 25th Jun 2010