A High Court case has vividly illustrated why professional advice is needed not only in drafting contracts but in administering them thereafter. A company was left on the brink of insolvency by its failure to submit a valid application for a stage payment during refurbishment of an office block.

The company had sought an interim payment of about £1.1 million from the block’s freeholder. Having not received that sum, it was unable to pay its subcontractors and was subject to a winding-up petition presented by an unpaid creditor.

The company claimed that the freeholder’s reasons for withholding payment were spurious and sought an injunction requiring immediate settlement. In refusing relief, however, the Court noted that the contract clearly stated that such applications for stage payments had to be free of ambiguity and state in terms the amount sought and the date on which it was due.

The company’s application did not meet those requirements and was thus invalid. Whilst acknowledging that this was a harsh result for the company, the Court noted that this was an area of the law where there was little scope for latitude.

For more information on this article or other contract or insolvency related matters, please contact Roy Colaba on 0121 698 2231 email, r.colaba@sydneymitchell.co.uk or fill out an online enquiry form.

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