If you go away …

It is difficult to remain enthusiastic about a job if you are not being paid. It is therefore common for contractors and subcontractors to react to non-payment by saying they are going to pack up and leave. If they are not being paid, why should they go on working?

This might sound like common sense, but in reality it is a high-risk strategy. Breach of obligation by one party does not release the other from its own obligations unless that breach is so serious that it amounts to what lawyers call "repudiation". The party in breach is effectively tearing up the contract and saying that it does not intend to play the game. Refusal to pay at all might be repudiation, but failure to make an interim payment or two seldom is.

If a contractor walks off the job when it is not legally entitled to do so, it risks being found itself to be repudiating the contract. If it does that it can be pretty confident that it won't see any money for a long time, and there will probably be a big claim for delay damages and the increased cost of finding a replacement contractor.

So just what can the cash-starved subcontractor do about it? First of all, it is worth asking whether there is a contract at all. The courts take some convincing that there is no contract when somebody has been on a building site doing work for several months. There are times though when that is the position. In Birse Construction Ltd vs St David Limited the contractor walked off a project when it wasn't being paid properly and established that there was no contract – everyone had been so busy sorting out the partnering Charter that they had never got round to sorting out the contract. As there was no contract, nobody could accuse them of repudiating it. Badly drafted letters of intent also sometimes set up the argument that there is no contract by expressly denying the existence of one. That can leave the person doing the work in a very strong position.

If there is a contract, it may be subject to the Construction Act. The act did not just bring in adjudication. It also gave contractors and subcontractors the right to suspend work if payment was not received. There are, of course, some conditions.

First of all, there has to be a sum due. If there is an argument about that, we are back to the same old problem. To suspend when no payment is due is potentially a repudiation of contract, so don't suspend unless you are absolutely certain that money is due and you can prove it.

Refusal to pay at all might be repudiation, but failure to make an interim payment or two seldom is

Then there is the possibility of a notice to withhold payment. If the party that ought to be doing the paying has given a notice at the appropriate time (which will depend on the terms of the contract) that it will be deducting a contra charge, failure to pay in full will not allow the other party to suspend. On the other hand, if a contra charge has been deducted without a proper notice being given, the right to suspend is quite clear.

And then there is the requirement to give seven days' notice of intention to suspend. Seven days can be a long time when you are not being paid, and even to reduce the workforce prior to the expiry of the notice period is a breach of contract.

Suspension under the provisions of the act entitles the suspending party to an extension of time. But once proper payment is made, the right to suspend comes to an end. It may take a few days to remobilise, but there will be no extension of time for those few days.