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Suspension due to non-payment under the GCC

8 January 2019

For those Contractor’s who experience difficulty in obtaining payment on a project governed by the GCC 2010, suspension of the Works due to non-payment is an appealing yet elusive and, ultimately, risky response.  Clause 5.11 of the GCC 2010 deals with suspension of the Works and a careful reader will note that the only person entitled to suspend the Works, for whatever reason, is the Engineer.

 Some may argue that the principle of reciprocity applies i.e. that in any contract, where both parties undertake obligations to the other, the intention is that neither is entitled to enforce the contract unless they have themselves performed or are ready to perform their own obligations. In other words, the Employer cannot enforce progression of the Works, when it has failed to make progress payments for work already done.  This is, however, subject to an interpretation of how the contract terms were intended to operate  (Hauman v Nortje 1914 AD 293, Nesci v Meyer 1982 (3) SA 498 (A) 513; Rich and Others v Lagerwey 1974 (4) SA 748 (A), BK Tooling (Edms) BPK v Scope Precision Engineering (Edms) BPK 1979 (1) SA 391 (A), James v Mendelowitz 1983 (1) SA 481 (C)).

 The 2015 edition of the GCC solves this difficulty with Clause 5.11.1 thereof stipulating that “[t]he Contractor may, after giving fourteen (14) days written notice to the Employer, with a copy to the Employer’s Agent, (with specific reference to this Clause) suspend the progress of the Works where the Employer’s Agent or the Employer has failed in terms of Clause 6.10.4 to…[d]eliver a payment certificate, or…[m]ake full payment of the amount certified in the payment certificate…” [emphasis added].

 Author: Michelle Kerr,  Senior Associate