Payment - Scottish Construction Contracts - page 199

excludes section 110 (1A) from operating in the PFI sphere, in relation to contracts
between a project company and construction sub-contractor. he exclusion does not,
however, apply to the tier of contracts beneath the project company and construction
contractor.
While section 110 (1A) was intended to improve cash flow for sub-contractors,
main contractors have sought to dilute the impact of the section. Rather than agreeing
that payment is to be conditional on payment or some other event up the contractual
chain, contractors are seeking to include contractual provisions which provide that
payment is due on a specific date a considerable period into the future, thus reducing
the risk for the contractor of paying the sub-contractor, while not being in receipt of
funds from the employer.
8.1.8 The amount to be paid
The final contract price, or a mechanism for ascertaining the final contract price, is
a fundamental and essential part of the contract and should be agreed at the time the
parties enter into the contract, see Uniroyal Ltd v. Miller & Co. Ltd (1985). If no price
or mechanism has been agreed, then it may be possible for a contractor to obtain
payment on the basis of quantum meruit . This is discussed in Section 8.4. The price
to be paid by the employer to the contractor for carrying out the contract works may
be ascertained by a number of different methods. In many building contracts it may
not be possible to calculate the contract price until after completion of the works,
see, for example, Arcos Industries Pty Ltd v. he Electricity Commission of New South
Wales (1980).
Lump sum contracts
In what are commonly known as lump sum contracts the employer and the contractor
agreethepriceforthecontractworksatthetimeofenteringintothecontract.Assum-
ing the contractors complete the contract works, then they will be entitled to be paid
the agreed price regardless of what the works have actually cost to construct. See,
for example, Mitchell v. Magistrates of Dalkeith (1930). Even in lump sum contracts,
however, the price can alter as a result of a number of matters including additions
to or omissions from the contract works, events giving rise to loss and expense, and
fluctuations in cost.
Anerroronthepartofthecontractorincalculatingthepricewillnot,however,
result in an alteration to the price and the contractor is bound by the price even if
the work costs more than they allowed for, see Seaton Brick and Tile Company Ltd v.
Mitchell (1900). A contractor will only be entitled to additional payment if he has a
contractual entitlement thereto.
UndertheSBCandtheSBC/DB,theEmployerandContractoragreeaContract
Sum at the time of entering into the contract and Article 2 provides that the Employer
shall pay to the Contractor the Contract Sum or such other sum as shall become
payable in accordance with the conditions of contract. Clause 4.2 further provides
that the Contract Sum shall not be adjusted other than in accordance with the express