JBCC rescue – Can the employer

refuse to pay an amount

unjustly/incorrectly certified?

By Kobus le Roux

For contractors, the best time each month is when they cheerily expect the release of their
interim payment certificate on a large project. Even more special is when payment is made on
time and as per the certified amount. Yes, I can actually hear all of you scoff while reading this!
Thinking: “when was the last time this happened without an unfair amount of drama or a high
degree of strain and tension.”

Interim payment certificates are one of those exceptional mechanisms of the construction
contract. Under the common provisions of reciprocal contracts, the intention is that neither
of the parties should be entitled to enforce the contract unless they have performed or are
ready to perform their own obligations. Translated to our industry, it means that a contractor
cannot expect payment for work until he has fully delivered his own performance which is a
functional and completed building.

This provides a problem in construction contracts because the performance amounts are
typically in the high millions or hundreds of millions.

The interim payment certificate is a mechanism that bridges this problem. It allows for
payments to be made regularly, without implying that the contractor performed his obligation
in full compliance as per the specification. Only the final certificate carries that implied power.
The reason I like this case study is because it succinctly demonstrates the overriding authority
of a principal agent under the JBCC contract.

It is very important to note that the principal agent is not a party to the contract as per the
law-defined meaning of a party. In other words, the principal agent does not acquire any
contractual rights and obligations. However, the principal agent is still a key independent
professional role player as is demonstrated below.

Let’s set out the facts:

1. Fact 1 - Under JBCC, the Employer warrants that the principal agent has full authority
to act on his behalf. In simple terms this means that any act by the principal agent is
equal to an act by the employer himself.
2. Fact 2 - This authority extends to approving interim payment certificates as well as any
additional expenses or adjustments of the contract value.
3. Fact 3 – An interim certificate is a liquid document that creates a separate obligation
for the employer which stands isolated or separate from the JBCC contract ( See
Randcon Ltd v Florida Twin Estates).
4. Fact 4 – Stemming from the previous fact and the JBCC contract, the Employer cannot
dispute or refuse to honour the obligation to pay an interim certificate issued by his
principal agent.

These facts establish without a doubt that once an amount is certified by the principal agent,
it must be paid by the Employer even if he disagrees with it and even if there is a mistake.
When mistakes are made, the JBCC contract provides 100% assurance, terms and guidance for
the parties that will ensure correction of the mistake without prejudice to the employer.

Now for the interesting part: What about the changes made to the standard provisions of JBCC
in our case study? The employer did state that a claim can only become valid after acceptance
and certification by him.

In this particular instance, we have to acknowledge the authority of the principal agent did not
change. In other words, the employer still warrants that the principal agent has full authority
to act on his behalf and bind him (see clause 6 of JBCC Principal Building Agreement 6.1).

This means that when the principal agent act, we can accept such action as the employer’s.
Therefore, even with this qualification, the certificate was valid because it was accepted and
certified by the principal agent (with full authority) and hence, deemed to be accepted and
certified by the employer himself!

I see this mistake often made in qualifications where employers try to limit their exposure and
tamper with the mechanisms without fully understanding the consequences.
 This article was compiled by Kobus le Roux for Le Roux Consulting, all rights reserved. Please contact us for
your professional project planning, project control, claims or adjudication assistance services in the heavy civil
and building industry.
http://www.lerouxconsulting.com/
Kindly note that our posts on social media do not constitute professional advice and the comments, opinions
and conclusions drawn from this post must be evaluated and implemented with discretion by our readers at
their own risk.

About the Author

Kobus le Roux (MBA, Pr. CPM, PMI-SP, A.A.Arb) is the Managing Director of Le
Roux Consulting (Pty) Ltd, a South African project management consultancy
specialising in project scheduling, control and construction contract
services. Kobus has over a decade experience in managing the time on
complex projects. He is internationally qualified as a Scheduling
Professional with the PMI. He is also a technical construction specialist and
regularly assist parties with the interpretation of the JBCC, NEC, FIDIC or
GCC construction contract. As an Associate to the Association of Arbitrators
he regularly provides expert assistance to parties entering into various
forms of dispute resolution proceedings or litigation.

Link to the article on our website:

http://www.lerouxconsulting.com/jbcc-rescue-can-the-employer-refuse-to-pay-an-amount-
unjustly-incorrectly-certified/