Suspension of work (contracting)

Recently, the Board of Arbitration in Construction Disputes (BoA) had to intervene in a high-stakes dispute over unpaid invoices. The client had suspended payment of about 20 per cent of the contract price as security for a list of (alleged) remedial works. Afterwards, it turned out that the authority to suspend did not exist, leaving the client facing a hefty cost. This article therefore discusses suspension in construction in detail. As suspension in construction is a complex matter, which cannot be fully captured in an article, we advise you to always seek advice and guidance.

Suspension, how was it again?

The party invoking suspension postpones its performance until the other party complies. For example, the client will not pay the contractor’s bill until the state of the work matches that payment. Conversely, the contractor will put the work on hold if his invoice is not paid. In practice, it then frequently happens that if one party suspends, so does the other. The client and contractor then look at each other, causing construction to stagnate and damages to mount.

The question is then which party should have performed first, and whether the invocation of suspension is legally valid.

Three requirements

In general, there must be three different requirements, all of which must be met:

1. The other party must have defaulted. This will generally be the case for payments if the invoice date has passed, and for work if the contractor does not (yet) properly repair or perform the work despite a notice of default. An alternative is if the other party makes a communication indicating that it will not comply. This also constitutes default.
2. There must be coherence between the claim and the obligation. This can also be a problem in construction disputes, because additional work and the construction of the work itself are not always laid down in the same contract, which means that there are two different legal relationships.
3. Suspension must be proportionate. Here, there must be a certain reasonableness of the measure taken, where (in the case of a payment) the suspended part of an invoice must be proportional to the extent of the defect still to be rectified.

If, as a result of the above, one of the parties has wrongfully suspended (in retrospect), the consequences are significant. The suspension has then been done without authority, resulting in damages on the other party’s side.

Different regime UAV for suspension

In addition to these general rules, it is still important to check whether your agreement is subject to the Uniform Administrative Conditions for the Execution of Works and Technical Installation Works 2012 (UAV). If so, vigilance is required. The UAV contains a specific and stringent regulation for being allowed to proceed to suspension, where it is also called ‘suspension’.

For the contractor to successfully invoke suspension/suspension under the UAV, two conditions must be met:

1. The contractor must first send a reminder two weeks after the payment deadline has passed. This reminder must demand payment, giving the principal a period of (another) 14 days.
2. If the principal also fails to pay after receiving the demand for payment, the contractor may proceed to suspend the work after the 14-day period has expired and may even leave the work unfinished. Importantly, however, the contractor is only entitled to do this if he has mentioned the suspension/suspension and/or termination of the work in the reminder. If the contractor fails to announce this suspension in the reminder, he forfeits this right.

If the above conditions are met, the contractor can stop the work and possibly also terminate it in an incomplete state. Moreover, the UAV has an additional advantage for the contractor. This is because the usually already high statutory commercial interest rate is further increased, by two percentage points, after the notice of default is sent. At a statutory commercial interest rate of 12.25 per cent (level H2 2024), this means that the principal owes 14.25 per cent interest on an annual basis.

Additional powers of principal under UAV

The UAV also grants the principal additional powers. If the contractor is in default after having been given written notice of default, the following options are open to the principal (among others):

1. Suspending payments
2. Completing the work or having it completed at the contractor’s expense
3. The right to claim damages
4. Paying suppliers and subcontractors directly
5. Using the contractor’s resources

These options are not all uncontroversial. This is particularly the case with direct payment to suppliers and subcontractors. If the contractor goes bankrupt, the receiver may take the position that the principle of equality among creditors has been violated. Because due to the principal’s actions, some creditors receive money and others nothing. Specifically, the principal then runs the risk of being sued by the receiver for (part of) the estate deficit.

Consult an expert

If the contractor/client proceeds to suspend/suspend the work, or even terminates it or has it carried out by a third party, the costs can skyrocket. Therefore, always contact an expert if you are faced with a non-performing contractor or client. But also seek advice if you are considering suspension yourself

Any questions?

Do you have any questions? Then contact one of our lawyers by mail, telephone or fill in the contact form for a free initial consultation. We will be happy to think along with you.