Carillion has got its timing wrong


The intention of Carillion to increase its payment terms to 120 days (Carillion to double maximum payment terms to 120 days, 22 March, page 9) seems to have come at a particularly unfortunate time for them.

This is because, on 16 March 2013, European Directive 2011/7/EU came into effect for all contracts entered into after that date, as a consequence of the Late Payment of Commercial Debts Regulations 2013 (the drafting of which is almost unintelligible although thankfully the European Directive is written in plain English).

These provide for a maximum payment period of 30 days for a contract with a public authority or 60 days for other contracts (unless there is a very good reason for a longer payment period). I doubt whether an artificial boost to the balance sheet of Carillion would be considered such a good reason.

Perhaps contractors might consider entering into the contracts with Carillion incorporating their enforced 120-day payment terms and then politely pointing out to Carillion that such payment terms were unenforceable.

It might even be to the benefit of the subcontractor because Carillion may fail to issue its payment notice or any pay-less notice on time, thereby rendering it liable to pay the full amount of the subcontractor’s application for payment.

Steve Rudd, Construction Claims Consultants