Getting paid on your construction project: when you can stop work, and when you can’t (Part 2)

Four weeks in, and the cheque hasn’t come

You sent your invoice. You did the work. The deadline to pay came and went, and the owner has gone quiet. Your crew is standing around, your suppliers want their money, and every instinct you have is telling you the same thing: pull everyone off the job until you get paid.

It’s an understandable reaction. It’s also one of the fastest ways to turn a payment dispute into a problem that’s your fault. In Ontario, you can suspend work to force payment, but only after you’ve followed the right steps. Walk off too early and you become the one in breach.

In Part 1, we covered holdbacks: the money set aside so the people who did the work get paid. This article covers how to use suspension of services the right way to compel payment.

It all starts with a “proper invoice”

Everything in Ontario’s prompt payment system runs off one document: a proper invoice. That’s a specific legal term, not just any bill you send over. Under section 6.1 of the Act, a proper invoice has to include:

• Your name and address as the contractor.
• The date of the invoice, and the period, milestone, or contractual payment it relates to.
• Information identifying the contract the work was supplied under, such as a contract or purchase order number.
• A description of the services or materials supplied.
• The amount payable and the payment terms.
• The name, title, mailing address, and phone number of where payment should be sent.
• Any other information that’s necessary, or that the owner reasonably requests.

Even if your invoice is missing some of these details, it’s still deemed proper unless the owner notifies you of the deficiencies, and what’s needed to fix them, within 7 days. Stay silent past that window, and the payment clock starts running on the invoice as it is.

The clock: 28 days to pay, 14 to object

Once you deliver a proper invoice, the owner has 28 days to pay it.

If the owner wants to dispute all or part of the invoice, they can’t just go quiet. They have to serve a Notice of Non-Payment within 14 days of receiving the invoice, setting out what they’re refusing and why. Silence is not a valid objection, and it doesn’t stop the clock.

Why you can’t just walk off

This is the part contractors get wrong most often. The Act does not give you a self-help right to suspend work just because an invoice went unpaid. A missed payment, on its own, doesn’t free you to put down your tools.

If the owner neither pays nor serves a timely Notice of Non-Payment, your move isn’t to leave but to refer the dispute to interim adjudication under Part II.1 of the Act. Adjudication is built to be fast. The adjudicator’s determination usually lands within 30 days, and any amount ordered must be paid within 15 days of that determination.

A missed payment doesn’t let you put down your tools. The right to suspend arrives only after an adjudicator orders payment and the owner still doesn’t pay.

When can you actually stop work

The right to suspend shows up at the next stage. If the adjudicator orders the owner to pay, and the owner still fails to pay within the statutory period, then you may suspend work.

Two things to note. First, there’s no right to suspend during the adjudication itself, only after an order goes unpaid. Second, even when payment is ordered through adjudication, you still have to retain the statutory 10% holdback. The rule from Part 1 doesn’t disappear.

Once you’ve lawfully suspended, you can keep the suspension in place until the owner pays the outstanding amount, plus mandatory interest, the reasonable costs of the suspension, and the cost of remobilizing when you return to the job.

A few unfinished items aren’t a reason to stop paying

This cuts in the owner’s direction too. An owner doesn’t get to sit on the entire contract balance over a handful of minor defects or some incomplete after-sales items. Minor deficiencies generally don’t justify terminating the contract or withholding a substantial payment.

An owner who refuses to pay amounts properly due, or who insists every small item be finished before releasing a large payment, may be found to have fundamentally breached the contract. If that happens, the contractor may be entitled to stop work and claim payment on a quantum meruit basis, that is, the reasonable value of the services and materials already supplied.

What your contract can and can’t change

So what if your contract says something different from the Act?

If a contract term conflicts with the Act by offering less than the Act requires, that term is void. It gets struck out, and the rest of the contract carries on as normal. You can’t sign away the protections the Act builds in.

But the Act doesn’t regulate everything. Where the contract deals with matters the Act leaves open, the contract governs. Those can include:

• Termination for convenience.
• Default cure periods.
• The form, content, and delivery of notices.
• Demobilization and compensation formulas.

Whether a particular term crosses the line is a fact-specific question. It’s worth having a lawyer review it before you rely on it.

Not sure whether you can lawfully stop work? Suspending at the wrong moment can flip a payment dispute into a breach claim against you. Before you make a move, let us look at your invoices, your contract, and your timing and tell you the right next step. Presvelos Law P.C. can walk you through it.