Payment delays can place significant pressure on contractors, subcontractors, suppliers, and owners. Across Canada, provincial and territorial construction legislation increasingly provides mechanisms intended to improve payment timelines and resolve disputes during a project. Two important concepts are prompt payment and adjudication.
The specific rules depend on the province or territory, the type of project, and the legislation that applies. Anyone relying on a statutory payment or adjudication process should confirm the current requirements and deadlines in the relevant jurisdiction.
What is prompt payment?
Prompt payment rules generally establish timelines for paying a contractor or subcontractor after a proper invoice is delivered. They may also require payment to flow down the construction pyramid, subject to limited grounds for withholding payment and prescribed notice requirements.
These rules are designed to reduce the risk that a payment dispute between two parties will interrupt payment to others who performed work or supplied materials. They do not necessarily eliminate disputes, but they can make the timing and process more structured.
What is adjudication?
Adjudication is a relatively fast dispute-resolution process used during a construction project. An adjudicator reviews the parties’ submissions and issues a decision, often on questions involving payment, valuation, changes, or the proper amount owing.
Unlike a conventional trial or arbitration, adjudication is generally intended to address an immediate project dispute without requiring the parties to wait until the work is complete. The decision may be temporarily binding, subject to the parties’ rights to pursue another process where permitted by applicable law.
Common issues in payment disputes
- Whether an invoice meets the statutory or contractual requirements for a proper invoice.
- When the payment period began to run.
- Whether a party gave a valid and timely notice of non-payment.
- Whether the amount claimed is affected by deficiencies, set-offs, changes, or back charges.
- Whether the contract, project, and parties fall within the applicable legislation.
- Whether an adjudication notice or referral was made within the required deadline.
Steps that can help protect a payment claim
- Review the contract and legislation. Identify the invoicing procedure, payment terms, notice provisions, and dispute-resolution options.
- Keep a clear project record. Preserve contracts, invoices, delivery records, schedules, site instructions, change documentation, correspondence, and proof of performance.
- Submit invoices carefully. Use the required format and deliver the invoice through the contractually or legally required method.
- Track every deadline. Payment notices, notices of non-payment, lien rights, adjudication referrals, and court claims may each have different limitation periods.
- Respond to disputed amounts promptly. A payment dispute should be documented with the amount in question, the reasons for the position taken, and the supporting records.
- Obtain advice before taking a formal step. A missed deadline or defective notice may affect the availability of a statutory remedy.
Prompt payment is not a substitute for good contract administration
Statutory payment mechanisms work best when project records are accurate and communications are timely. Parties should establish a process for approving invoices, documenting progress, recording changes, identifying deficiencies, and escalating disputes before they become larger claims.
Because construction payment legislation differs across Canada, a procedure that is effective in one province may not apply in another. Legal advice should be based on the governing law, project location, contract language, and the roles of the parties involved.
This article provides general information only and is not legal advice. Construction law requirements can change and should be confirmed with a qualified lawyer in the applicable Canadian jurisdiction.
