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Remuneration and payment

Kortversjonen

Lytt til artikkelen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

‍

‍

Tilbake

Remuneration and payment

Kortversjonen

Lytt til artikkelen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

‍

‍

Tilbake

Remuneration and payment

Kortversjonen

Lytt til artikkelen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

‍

‍

Tilbake

Remuneration and payment

Kortversjonen

Lytt til artikkelen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

‍

‍

Remuneration and payment

Kortversjonen

Lytt til artikkelen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

‍

‍

Remuneration and payment

Kortversjonen

1. Introduction

The main obligation of the main or general contractor is to pay the subcontractor for the work performed and, incidentally, in accordance with the agreement of the parties. Non-payment may, in its extreme consequence, constitute a material default with the serious consequences that this can have if the subcontractor ceases its works.

The rules on payment are therefore very central, and we will deal with these below.

2. Overview of the provisions

Naturally, all three standard contracts have rules on remuneration and payment, namely NS 8415 Chapter V, NS 8416 paragraph 23 and NS 8417 Chapter VI, see matrix below.

Since NS 8417 is the standard contract used most often, we start from this.

3. Briefly about the agreed remuneration

NS 8417, paragraph 26.1, states that subcontractor “is entitled to agreed remuneration”.

The agreed remuneration will normally be the agreed contract amount. In NS 8417 paragraph 1.6, contract sum is defined as “the originally agreed consideration (...) including VAT. The contract sum shall also include the originally agreed estimate of remuneration for services to be settled at unit prices or at bill of charge'.

This is also the definition in NS 8415 paragraph 2.8 and NS 8416 paragraph 2.

In NS 8417 contracts, a fixed price will usually be agreed which is not to be regulated for quantities.

This is in contrast to contracts based on NS 8415 and NS 8416 where there is usually a quantity description in which the individual units are priced, and then a settlement is made in connection with the final settlement.

While NS 8417 has provisions on billing schedule, we do not find provisions for this in NS 8415 and NS 8416.

4. Billing Schedule

It follows from NS 8417 paragraph 27.2.1 that “(K) the contract sum shall be paid on the basis of a billing schedule”. Furthermore, it follows that the parties should “Work it out together as soon as possible.” if it has not already been agreed “at the conclusion of the contract”.

The intervals for billing should be one month. If the construction time is estimated at 13 months, the starting point will be that the contract sum is distributed over 13 a account invoices. However, this does not mean that you get 13 account invoices with equal amounts.

Some guidelines on how to draw up the billing plan are given in NS 8417 paragraph 27.2.1, third and fourth paragraphs, but the starting point is that the parties can freely agree on what they themselves wish, cf paragraph 27.2.1, second paragraph.

The underlying principle of all invoicing in construction contracts is that contractor gets paid as value is added to construction site.

When creating an invoicing plan, it will therefore have to be based on what is planned to be carried out by works on the construction site, what is supplied by materials for embedding, etc. In turnkey contracts, engineering is also carried out and then it is natural that invoicing for design work occurs as design material is handed over to the general contractor.

These general principles are also enshrined as governing how to draw up a billing plan in cases where the parties do not agree, cf. NS 8417 paragraph 27.2.1, second and fourth paragraphs.

From NS 8417 paragraph 27.2.1, third paragraph, it follows that the subcontractor shall “draw up a production plan based on the progress plan”. This production plan shall “show the correlation between planned production and the billing schedule”. And after all, the production plan will provide precisely the kind of information that concerns the planned supply of work and materials to the construction site, the handover of production material to the general contractor, etc.

In sum, we can safely say that the invoicing schedule is normally harmonized with the planned progress as stated in the progress plan and production plan, respectively.

5. Billing Schedule Adjustment

If there is an excessive lag between actual production and planned production, the general contractor may require that the invoicing schedule be adjusted, cf. paragraph 27.2.1, fifth paragraph.

In some cases, the general subcontractor may also require such adjustment of the invoicing schedule when continuing the works, but only on the condition that: “the provision is imposed or agreed with the general contractor”.

In practice, one may also find that the general contractor refuses to pay all or part of an a account invoice because it is considered that the progress has come too short compared to what was originally expected.

In that case, there will be, as a starting point, a default of payment where the burden of proof is borne by the general contractor or the general contractor.

6. The subcontractor is not entitled to prepayment in the case of prefabrication

It is not uncommon for parts of subcontractor deliveries to be prefabricated elsewhere before the units are transported to a construction site for embedding. These can be concrete elements, aggregates, elevators, bathroom modules, etc.

Most often, factories that account for such prefabrication will require a down payment. From time to time questions arise from the subcontractor as to whether such advance payment can be entered as part of the basis for a account payment.

There is freedom of agreement and the total or general contractor is free to accept that this is done.

However, it is not a given that the builder will accept that such advance payment is included as a factor in the progress payment agreed in that clause of the contract.

If one does not agree, taking into account the provisions of NS 8417 paragraph 27.2.1, fourth paragraph, then this provision does not provide for the inclusion of such prepayment for prefabricated materials as the basis for a bill invoicing. In this regard, we indicate in the fourth paragraph letter c where the condition for being able to claim payment for materials, etc. is that these “is added to the construction site to be built in”.

The quoted is also the main rule in execution centers. We refer, in this regard, to NS 8415 paragraph 28.1, the first paragraph of which it is stated that installments can only be claimed for what is “supplied to the construction site of materials and goods to be built in”.

7. Documentation requirements for a account billing, NS 8417

When a subcontractor invoices according to an agreed billing plan, it follows from NS 8417 paragraph 27.4 that the subcontractor must attach the documentation required by the plan.

Often, documentation will not be accompanied significantly as long as the progress is “on schedule” and the installment invoice is in accordance with the billing schedule.

8. Propulsion Payment, NS 8415

Neither NS 8415 nor NS 8406 have provisions on the billing schedule, but there is nothing preventing the parties from drawing this up.

NS 8415 paragraph 28.1 “Settlement of contract amount and withholding” also assumes that the parties have entered into an agreement on installment invoicing.

These standards are clear that what the subcontractor can claim installments for is “that which has been carried out, and that which has been supplied to the construction site of materials and goods to be incorporated”.

9. Documentation requirements for installment payment in NS 8415

It is stated in NS 8415 paragraph 28.3 that the subcontractor shall: “send to the main contractor specified invoice which can be checked, if necessary by correlation with the contract documents”.

Furthermore, it is stated in the second paragraph that “measurements and other documentation necessary for the control of the general contractor shall accompany”.

Similar rules can be found far along in NS 8416 paragraph 23.3.

If one compares the documentation requirement of NS 8415 and NS 8416 with NS 8417, it is probably correct to say that more supporting documentation is expected for an installment invoice in an execution company than is the case in a turnkey contract.

The explanation is enough that the contract sum in an execution company is most often based on quantities to be measured and settled.

In turnkey contracts, one is not concerned with quantities, but with function. In such contracts, as a rule, the contract amount is fixed (in the sense of a fixed sum) and therefore no final settlement should be made.

10. Main/general contractor's payment is not a simultaneous acceptance of the basis

It is clear from the standard contracts that the payment of an instalment invoice by the main/general contractor is not to be regarded as an “approval of the basis of the invoice concerned”.

We refer in this regard to NS 8415 paragraph 28.1, third paragraph, NS 8416 paragraph 23.3, fourth paragraph and NS 8417 paragraph 28.1, second paragraph.

Even if all a-account invoices have been paid (without reservation), it does not prevent total or general contractors from raising objections to the final settlement that also existed at the time the a-account invoices were paid.

11. Invoicing of other remuneration by subcontractors

It follows from NS 8415 paragraph 28.2, NS 8416 paragraph 23.3, paragraph 6 and NS 8417 paragraph 27.3 that for works other than those originally agreed, invoices must be invoiced separately and on separate invoices.

Usually this is solved by having a separate series of invoices for a account invoices that are usually given the endorsement “A” and with running numbering such as “A-1”, “A-2”, etc. ,

Modification works have a series of other endorsements such as “T” or “E” with running numbering.

It is important to note that all three standard contracts stipulate that other consideration such as amendments shall first “to be billed (...) when completed”.

In the case of particularly extensive or expensive modification works, this may be demanding for the subcontractor. Accordingly, the provisions contain the possibility that the subcontractor may invoice monthly if the works are carried out “is of longer duration”.

For such works, a fixed price may be agreed, but it is not uncommon for unit prices, adjusted unit prices or for the works to be carried out on account.

Common to all standards is that the invoices for modification works shall be “specified and attached measurements and other documentation necessary for” control, cf. NS 8417 paragraph 27.4, second paragraph. A similar provision is found in NS 8415, paragraph 28.3, while NS 8416, paragraph 23.3, only requires that the invoice must be “specified”, which by far implies the same thing.

I'm 12. Bill Worker

In order to keep the articles at a somewhat limited level, we have chosen to write about this topic in a separate article.

I'm 13. Main/General Contractor's Payment Obligation and Right of Withholding

It follows from all three standard contracts that the deadline for payment shall be 28 days unless otherwise agreed, cf. NS 8415 paragraph 29.1, NS 8416 paragraph 23.3, eighth paragraph and NS 8417 paragraph 28.1.

In case of late payment, the main/general contractor shall pay late interest, cf. NS 8415 paragraph 30.1, NS 8416 paragraph 3.3, eighth paragraph and NS 8417 paragraph 29.1.

If the main/general contractor has counterclaims or objections to the subcontractor's breach of contract, he may “withhold so much of the payment that this covers the specified and substantiated claim”, see NS 8417, paragraph 28.3.

The corresponding provision follows from NS 8415 paragraph 29.3 and NS 8416 paragraph 23.3, last paragraph.

In experience, such retention can create some challenges and become a burden on cooperation.

A not uncommon situation is that the subcontractor is so far behind the progress plan that a bill becomes too high compared to what has been added.

If the billing schedule has not been adjusted, the total or general contractor will not be able to do anything other than withhold part of the invoice in order to avoid being forced into payment.

In this case, the subcontractor should be notified in advance and a dialogue should be sought.

Another basis for backlogs is errors and deficiencies, possibly delays that will trigger daymulch requirements.

14. Sub-contractor's right to terminate in case of main/general contractor's default on payment

If the total or subcontractor does not pay the subcontractor's invoices at maturity, the latter incurs a not insignificant liquidity challenge.

This is especially true for installment invoices.

When installment invoices are due for payment, the subcontractor will already have advance work and material procurement for a minimum of two months of production.

Failure to pay several instalment invoices can make the situation for a subcontractor very difficult in terms of liquidity.

For these reasons, a provision has been included in all three strandard contracts giving the subcontractor the right to suspend its works in case of material breach of the obligation to pay, cf. NS 8415 paragraph 30.2, NS 8416 paragraph 29.2 and NS 8417 paragraph 29.2.

In the assessment of what is “substantially” There are a number of points that we cannot find room to address here.

We are content to clarify that the terms “substantially” shows that the default must be so serious that there is also a reason for recovery.

Before a subcontractor decides to stop its work, there are two things in particular that one should be aware of.

First, one must notify the other in advance so that the latter has at least 24 hours to correct his or her material default. That means the 24-hour deadline must at least include one business day.

Second, one must be aware of the risk that the total or general contractor reacts by rescinding the contract as a result of the stoppage. An unwarranted stoppage is tantamount to a material default. The subcontractor that terminates should therefore be very sure that the contracting party could not withhold its payment as a result of circumstances of which the subcontractor had the risk.

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