Final dates for payment in UK construction contracts: court confirms strict application of statutory requirements

On 23 June 2026, the Technology and Construction Court (TCC) delivered its judgment in Deerns UK Limited v VDC, the latest in a series of cases concerning payment disputes in the context of final dates for payments and pay less notices. In affirming and extending the application of prior case law, the TCC confirmed that the final date for payment under a construction contract must be a fixed period from the due date. Any contractual mechanism that has the effect of adjusting the final date for payment by reference to a different event (such as the submission of an invoice or payment application) will fall foul of the statutory mechanism governing such payments, leading to unintended consequences.

The dispute

The defendant had engaged the claimant to provide engineering consultancy services in relation to a development at Chandos Park Estate, London. The claimant submitted two applications for payment, in respect of which the defendant submitted two pay less notices. 

Clause 7.2 of the contract between the parties provided that "[t]he final date for payment shall be 30 days after the relevant due date save that if the Consultant's invoice is issued late, the final date for payment shall be postponed by the same number of days by which the Consultant's invoice is late". 

The claimant argued that the contract did not properly stipulate a final date for payment in accordance with the requirements of the Construction Act. It contended that the relevant provisions of the Scheme for Construction Contracts should be incorporated into the contract, such that the final date for payment was 17 days after the due date, with any pay less notice due not less than five days before that date. The effect of this conclusion would be that the defendant's pay less notices had been submitted out of time, and it was therefore required to pay the notified sum (the amount the paying party was required to pay in the absence of a valid pay less notice).

The defendant argued that: 

• The contract provided a final date for payment which was compliant with the Construction Act. The scheme did not therefore apply and the provisions of the contract should be applied as drafted, meaning that the pay less notices had been submitted within the necessary time limits. 

• If the scheme did apply, it should apply in such a way as to cause the minimum change to the terms agreed by the parties.

• The parties had been operating the contract as if it had been in compliance with the Construction Act, and the claimant was therefore estopped from asserting that the scheme applied to the contract.

Variability of final date for payment

A contract that does not provide for an identified and fixed period between the due date for payment and the final date for payment fails to provide for a final date for payment for the purposes of the Construction Act (per Rochford v Kilhan and Lidl v Closed Circuit Cooling, discussed in this Insight and this one). 

While it is open to parties to have a mechanism which varies the due date for payment, they must provide for a fixed period (the length of which is open to the parties) between the due date for payment, whenever and however that date is established, and the final date for payment.

Following this line of authority, the judge agreed with the claimant and held that a final date for payment which could be altered upon the happening of a variable event, such as late invoicing, cannot satisfy the requirements of the Construction Act. The judge also noted that this conclusion would be the same whether the variable event happened either before or after the due date.

Applying the scheme 

If the scheme did apply, could it be applied in such a way to better align with the time periods agreed in the contract?

While acknowledging that the application of the (significantly shorter) time periods set out in the scheme meant that the claimant would receive a windfall, the judge held that a piecemeal application of the scheme was an interpretation that was "not open to me as a matter of law". 

This was because the Construction Act makes clear that, where a final date for payment has not been provided, the scheme applies. The scheme itself is also clear in providing a final date for payment 17 days after the due date. There was therefore no room for the court to redraft the parties' agreement or impose different time periods to those set out in the scheme.

Estoppel argument 

The defendant argued estoppel by convention (a principle that prevents a party from acting inconsistently with a shared assumption it has helped create). It claimed the parties shared a common understanding that, where a payment application was submitted late, all subsequent fixed payment dates in the contract  would be recalculated such that the final date for payment always fell 30 days after the due date, rendering the contract compliant with the Construction Act. Therefore, the claimant was estopped from contending that the contract was to be operated in a different way, and the contract should be seen as compliant with the Construction Act.

The judge held that this defence was not made out. The alleged common understanding was "radically different" from the contract's provisions and, critically, there was no evidence it had been communicated between the parties. Estoppel by convention requires demonstrable communication of the shared assumption relied upon. While not strictly necessary in every case, the judge observed that it would at the very least be expected that one party would communicate the effect of a late payment application on the revised timetable.

Osborne Clarke comment 

This decision aligns with and provides new clarification as to the scope of the position taken in Rochford and Lidl that a final date for payment must be calculated by reference to a specified amount of time from the due date in order to comply with the Construction Act. Any provisions of the contract that state that the final date for payment will be calculated by reference to any other event should be strictly avoided. 

It also provides an important reminder that, if parties are deemed not to have provided a final date for payment in accordance with the Construction Act, the scheme will apply without modification. As in this case, the time periods that apply under the scheme may end up being significantly different from those agreed in the contract, likely to the detriment of the paying party.

Parties remain free, however, to inject some flexibility around due dates and payment applications, or to include other requirements as to the submission of invoices. As stated in Rochford, there is nothing in the Construction Act that would have prevented the contract from providing that the due date was to be a particular period after the issue of the payment application or an invoice. Other, more practical solutions to ensure the timely submission of invoices are also available to contracting parties, such as providing that receipt of payment is conditional upon the receipt of an invoice, so that failure to submit an invoice gives rise to an entitlement to reduce the amount payable to zero (subject to the submission of a pay less notice). As evidenced by this case, careful drafting is needed to ensure that payment processes in construction contracts are both practical and in accordance with statutory requirements.

Alice Smith, trainee solicitor at Osborne Clarke LLP, assisted in producing this Insight.