Answer

There is absolutely no provision in the PBA for the employer to interfere with the payment process in any manner whatsoever. Where this happens it is a serious transgression of the Agreement and provides the contractor the grounds to declare a dispute or to give notice of his intention to terminate in terms of 38.1.3,6-8 [4.1 Edition 38.1.6-7]

Answer

JBCC does not advocate the use of a "Materials Off Site" cession form as it is almost certainly legally unenforceable thereby giving the employer a false sense of security. Where the contractor has provided a construction guarantee the cover provided in most instances is sufficient to include for this condition. If not the contractor can provide and Advance Payment Guarantee which covers this condition [31.6.5]

Answer

The only circumstance that allows the contractor to exercise his lien is “Where the employer has not paid or has made partial payment only....” [31.16]. I trust that the bank’s form does not include any provisions that are not within the Agreement provisions.

Answer

The agreement requires the employer to make payment 31.9 and does not specify the method of doing so - cash, cheque etc. JBCC cannot set specific methods of payment so I doubt that you can recoup the cost from the employer as this method is accepted in terms of the law of the land. The best I can suggest is that in future you should qualify your tender with the proviso that payments must be electronic or by certified cheque.

I too get really up tight when cash deposits are made to my account!

Answer

I trust you have read the definition of interest as stated in 1.0. For the purpose of demonstration I am assuming the current Reserve Bank rate (commonly known as the "repo rate") stands at 10.0%. This is published on the financial page of most newspapers and is instantly available on the Web - just search for "repo rate". Note that the rate can change each month so check before calculating the default interest due. Assuming the "default" amount due = R100 000, the late payment period is 21 calendar days the calculation is as follows:

In terms of 31.11 the default interest rate will be 10% x 160% = 16.0%.

Therefore the total amount due is:

R100 000 + (R100 000 x 16.0% x 21 / 365) = R100 920.55

Straight forward? I trust so!

Answer

The employer’s liability for payment of compensatory interest [31.10] is based upon the fact that he now has the benefit of possession of the works, albeit only in a state necessary to meet the requirements of practical completion, whilst the contractor has not yet been paid the full contract value.

Consequently the contractor is entitled to recover compensatory interest on the amounts certified in all interim payment certificates issued 31 c days after the date of practical completion subject to the value of any item still outstanding 20 w days after the issue of the works completion list being excluded for the purposes of calculating such interest [25.4].

Answer

The employer is to pay the contractor the amounts certified in all interim payment certificates within 7 c days of the date for issue of the payment certificate [31.9], being the date stated in the post tender conditions [41.7] and not the date upon which it is issued or that reflected on the certificate . Where the employer fails to make such payment the contractor will be entitled to recover default interest on the amount compounded monthly at 160% of the interest rate [1.1] from the due date until the date of payment [31.11] which interest is to be included in the recovery statement [33.0].

Answer

The employer has no right whatsoever, whether in terms of the agreement or the law, to deduct any amount from that certified in a payment certificate nor may such certificate, once issued, be amended. Failure to pay the certified amount will entitle the contractor to terminate the agreement [38.1.6]. The correct procedure would be to adjust the value certified in the next payment certificate so as to take into account the value of the defective work should this not have been rectified in the interim.

Answer

The PBA edition 5 of 2007 does not state “VAT” invoice specifically as the document is used throughout the English speaking world for building contracts and some countries have another name for such a tax. Also, the VAT Act in South Africa is specific that a VAT invoice shall be issued before payment may be made in all business transactions.

Answer

The VAT requires that invoice be issued in a regular cycle for the duration of the project – usually monthly. This includes the traditional building industry holidays when no work may have occurred during the valuation period. ‘Negative’ VAT can not be certified in terms of the Act. Where such a situation occurs this may be claimed at the end of the financial year

Answer

The VAT requires that invoice be issued in a regular cycle for the duration of the project – the same date of the month unless this falls on a weekend/public holiday in which case the certificate should be issued before the date stated [31.3]

Answer

In law final payment can only be made after the works are complete.

Answer

In law transfer of ownership passes when the goods are paid for in full. In the real world, unless every transaction is paid for on purchase, and no accounts existed … clearly impossible! Hence the Construction Guarantee.

Answer

Always the ‘contract sum’.

Answer

Theoretically yes – but very difficult to adjudicate and award. Use [31.11] to pay default interest!

Answer

The principal agent may omit items from the valuation and record same in the recovery statement which will also create a record of such events.

Answer

Theoretically yes – as ‘retention’ is money earned but held back from the contractor … should be calculated in every certificate cycle, based on the ruling bank rate.

Answer

No – one wrong action does not make another wrong action right … The sub contractors must use the provisions of the N/S subcontract if they have not been paid (timeously).

Answer

Interest is defined in the PBA / MWA as “the bank rate applicable from time to time to registered banks when borrowing from the Central or Reserve Bank of the country named in the contract data. The ruling bank rate on the 1st calendar day of each month shall be used in calculating interest due for such month”.

‘Compensatory interest’ – would apply [31.10] on all amounts certified in an interim certificate issued 31 Calendar days after the date of practical completion … calculated by the principal agent (as shown in the recovery statement) compounded monthly from the date of practical completion up to and including the date on which payment is due to the contractor“ using the applicable bank rate.

‘Default interest’ would apply [31.11] “where the contractor does not receive payment of the amount due by the due date … the employer shall be liable for default interest …such amount shall be compounded monthly from the due date up to and including the date on which the contractor is to receive payment and included in the recovery statement. The principal agent shall calculate such default interest at the rate of 160% of the interest” using the applicable bank rate.

The contractor could be entitled to interest on the late payment of compensatory interest…!

Note: Where the State is owed money: – The rate is determined by the Minister of Finance in terms of Section 80 of the Public Finance Management Act 1999 (Act 1/1999) from time to time shall apply;
Where the State owes money: - The rate is determined by the Minister of Justice in terms of Section 1(2) of the Prescribed Rate of Interest Act 1975 (Act 55/1975) from time to time shall apply.

Answer

The contractor does not have to claim default interest as the employer is obligated to pay [31.5.6 and 33.1.2] If the principal agent does not show the calculation interest, the contractor can act in terms of [31.16] … issue a demand in terms of the payment guarantee / exercise his lien / give notice of suspension of the works – where the employer fails to react – give notice of termination [38.1.4,6]

Answer

The ‘bank rate’ relates to the percentage interest per year. This is prorated per day …for the period of default, added to the capital amount, attracting simple interest per month, which is compounded…

Answer

[31.15] If the employer has not paid on the due date the contractor may give 3 working days notice to suspend the works if payment is not received
[31.16] If the employer has not paid /only paid a portion of the amount owing on the due date, the contractor may issue a demand in terms of the payment guarantee / exercise his lien / give notice of suspension of the works – where the employer fails to react –give notice of termination [38.1.4,6].

Answer

In the 1990’s it was recommended that a cession of rights form was completed for materials stored off site but paid for by the contractor / employer. The form was withdrawn on legal advice as it is very difficult to prove ownership of the goods in court.

Answer

[31.4] requires that materials and goods intended for the works be itemized in the valuation
[31.4.2] That the value of such materials and goods must be a reasonable estimate / [31.6] that such goods have not been delivered prematurely / are stored and protected against loss / covered by insurance, and when stored off site – covered by an Advance Payment Guarantee.

Answer

An APG is a ‘cash deposit’ – and not work done, and thus douse not attract VAT. It is recorded in line 13 of the payment certificate form and shown on the recovery statement.