1. Field Name and Definition

Payment Terms refers to the agreed timeframe and conditions for payment of amounts claimed in a Cost Plus Payment Claim under a construction contract in NSW. This field specifies the number of days within which payment must be made after a payment claim is served, along with any specific payment methods or requirements outlined in the contract.

The Payment Terms field appears on a Cost Plus Payment Claim because it establishes the contractual deadline for payment, which is crucial for determining when payment becomes due and payable. This information is essential for enforcing payment rights under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) and calculating when late payment consequences may apply.

2. Legal Requirements

Relevant Sections of the Security of Payment Act 1999 (NSW)

The Payment Terms field is directly related to Section 11 of the Act, which governs the due date for payment:

• Section 11(1): "Subject to this section and any other law, a progress payment to be made under a construction contract is payable in accordance with the applicable terms of the contract."
• Section 11(1A): For payments from a principal to a head contractor, payment becomes due and payable 15 business days after a payment claim is made, unless the contract provides for an earlier date.
• Section 11(1B): For payments to a subcontractor, the Act specifies maximum timeframes that override any longer periods in a contract.

If payment is not made by the due date, Section 15 and Section 16 of the Act outline the consequences, including the right to recover payment as a debt due in court and the right to suspend work.

Case Law Clarifications

Consequences of Incorrect Completion

1. Uncertainty about when payment becomes due.
2. Difficulty enforcing payment rights under the Act.
3. Potential disputes over payment timing and interest calculations.
4. Complications in adjudication proceedings if payment timing is contested.

3. Practical Guidance

Step-by-Step Instructions

1. Review Your Contract: Locate the payment provisions in your construction contract that specify payment timeframes. This is often in a clause titled "Payment" or "Terms of Payment".
2. Identify the Correct Terms: Note the specific number of days for payment after a claim is submitted. For Cost Plus contracts, this is typically expressed as "X days from submission of claim."
3. Check for Special Requirements: Note any specific payment methods (e.g., electronic transfer), approval processes, or documentation requirements.
4. Enter the Information: In the Payment Terms field of your claim, enter the number of days (e.g., "14 days", "30 days") and include any specific methods if relevant.
5. Verify Against the Act: Ensure the payment terms comply with the minimum requirements of the Act. Remember that the Act may impose shorter maximum timeframes than your contract, especially for subcontractors.

Where to Find This Information

• The "Payment" or "Terms of Payment" clause in your written construction contract.
• Special conditions or schedules attached to the contract.
• The contract's preliminaries section.
• Relevant Australian Standard form contract terms (if incorporated by reference).

4. Common Mistakes and How to Avoid Them

Using Vague or Ambiguous Terms

Error: Writing "as per contract" without specifying the actual terms. This creates ambiguity and can lead to disputes.

Solution: Always state the specific timeframe clearly, e.g., "14 days from receipt of claim".

Contradicting the Contract or the Act

Error: Stating payment terms that differ from the contract or including "pay when paid" provisions, which are void under the Act.

Solution: Ensure the stated terms are a true reflection of the contract and are compliant with the Security of Payment Act.

Omitting Special Requirements

Error: Failing to include specific payment methods or documentation requirements that are part of the agreed terms.

Solution: Concisely include all relevant details, e.g., "21 days via electronic transfer to nominated account".

Best Practices to Ensure Accuracy

• Always refer to the original signed contract when determining payment terms.
• Clearly specify the number of days and when the period begins.
• Include specific payment methods if stipulated in the contract.
• Keep terms consistent across all payment claims for the same project.

5. Risks of Not Including This Information

Failing to clearly and correctly state the payment terms exposes you to significant legal, financial, and dispute-related risks that can undermine your cash flow and contract administration.

6. Examples

7. Related Fields

Reference Date

The reference date establishes *when* a payment claim can be made, while payment terms determine when payment becomes due *after* the claim is made.

Due Date for Payment

This date is the direct result of the Payment Terms. It is often calculated automatically as Reference Date + Payment Terms period, establishing the specific calendar date when payment must be received.

Claimed Amount

The payment terms apply to the total claimed amount, determining when this entire sum becomes due and payable.

Builder's Margin

In Cost Plus contracts, the payment terms apply to both direct costs and the builder's margin, ensuring the entire claimed amount is paid within the specified timeframe.

8. Frequently Asked Questions