Guide to Using the RIBA Professional Services Contracts 2018 - Other - Page 54
Contract terms
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What if the Client doesn’t agree with the fee?
On receipt of the Payment Notice, the Client should, and in the vast majority of
cases will, make the payment to the Architect/Consultant for the sum of their fees
on or before the Final Date for Payment. However, if the Client has an issue with the
work, the level of service or decides that they wish to pay less for whatever reason,
they may issue a second notice which has been called a ‘Pay Less Notice’. To be
effective, a Pay Less Notice must be served before any contractual deadline.
Should the Client, for whatever reason, intend to pay less than the Notified Sum, they
must give 5 days’ written notice to the Architect/Consultant not later than 5 days
before the payment is due, i.e. the Final Date for Payment. The Notice must state
the amount that the Client considers to be due on the date the notice is served and
the basis on which that sum is calculated, even if that sum is zero, together with the
grounds for doing so and the amount attributable to each ground. Providing the Pay
Less Notice is valid, the sum due under the Contract and payable by the Final Date
for Payment then becomes the sum in that Pay Less Notice, as long as it is issued
the number of days before the Final Date for Payment as set out in the Contract.
Any shortfall in the Architect/Consultant’s fee would then need to be addressed
with the Client and corrected in later interim payments or at final account stage or
the matter could be referred to an adjudicator. The adjudicator may agree with the
reduced sum or may decide that an additional sum, greater than the amount stated
in the Notice of Intention to Pay Less is due. In that case the Client has to pay that
sum within 7 days of the date of the decision or the date which, in the absence of
the notice, would have been the Final Date for Payment.
When looking to pay less, the Contract excludes all rights of set-off at common law
or in equity which the Client would otherwise be entitled to exercise.
What is the right of set-off?
The principle behind set-off is clear. It allows for the offset of competing monetary
claims to produce a single amount owed by one party to another. A party can
set-off sums payable either against sums recoverable under the same contract, or
under one contract against sums recoverable under another.
Set-off (sometimes called contra-charging) is a legal process by which the Client
defends a claim brought by the Architect/Consultant, by the Client setting off other
costs to eradicate or reduce the Architect/Consultants claim, claims which the
Client alleges against the Architect/Consultant, or vice versa.
For example, a Client might reclaim the cost of water damage to their property
caused by a roof leak as a result of incorrect detailing or specification above the
damaged area. In Building Contracts, a Contractor might set off costs against a
Sub-contractor that caused damage to finished work adjacent to the working area
of the Sub-contractor or, in the case of late completion a Client might set off the
appropriate amount of liquidated and ascertained damages in accordance with
the Contract.
Whilst set-off is often accompanied by a counter-claim it is to be distinguished in
that set-off cannot, unlike a counter-claim, give rise to a positive balance of claim.
Whilst this process is clearly complicated, if no Payment Notice is properly issued,
it will result in no payment for that period and an ineffective Pay Less Notice leaves
the Client with little alternative than to pay the sum notified no matter how strongly it
disagrees with the figure in question.
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