Short Title
Purpose of Act
Interpretation
Application
Exclusions
No Contracting Out
Obligation to Pay Contractor
Obligation to Pay Subcontractor
Milestone Payments
Amount of Progress Payment
Deemed Approval of Payment Application
Right to Suspend Performance and Payment
Interest on Overdue Payments
Right to Terminate a Construction Contract for Non-Payment
Dispute Resolution
Right to Information
Regulations
Coming into Force
First Session, Forty-second Parliament,
64-65 Elizabeth II, 2015-2016
SENATE OF CANADA
BILL S-224
An Act respecting payments made under construction contracts
FIRST READING, APRIL 13, 2016
THE HONOURABLE SENATOR Plett
4211526
SUMMARY
This enactment enacts the Canada Prompt Payment Act to provide for timely payment to contractors under construction contracts with government institutions, and to subcontractors under related subcontracts.
Available on the Parliament of Canada Web Site at the following address:
http://www.parl.gc.ca
TABLE OF PROVISIONS
An Act respecting payments made under construction contracts
Short Title
1
Canada Prompt Payment Act
Purpose of Act
2
Purpose
Interpretation
3
Definitions
Application
4
Application
Exclusions
5
Exclusions
No Contracting Out
6
Waiver
Obligation to Pay Contractor
7
Progress payment
Obligation to Pay Subcontractor
9
Progress payment
Milestone Payments
11
Contract
Amount of Progress Payment
15
Amount
Deemed Approval of Payment Application
16
Approval
Right to Suspend Performance and Payment
17
Suspension
Interest on Overdue Payments
18
Rate
Right to Terminate a Construction Contract for Non-Payment
19
Termination
Dispute Resolution
20
Referral
Right to Information
21
Request
Regulations
22
Regulations
Coming into Force
23
Six months after royal assent
1st Session, 42nd Parliament, 
64-65 Elizabeth II, 2015-2016
SENATE OF CANADA
BILL S-224
An Act respecting payments made under construction contracts
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
Short Title
Short title
1 This Act may be cited as the Canada Prompt Payment Act.
Purpose of Act
Purpose
2 The purpose of this Act is to strengthen the stability of the construction industry and to lessen the financial risks faced by contractors and subcontractors by providing for timely payments to them under construction contracts involving government institutions.
Interpretation
Definitions
3 The following definitions apply in this Act.
change means any modification to a construction contract that
(a) varies the price or its method of calculation;
(b) increases or decreases the amount of construction work;
(c) varies the method of performance of construction work; or
(d) varies the schedule for performance of construction work. (modification)
construction contract means a contract in which a party undertakes to provide construction work. (contrat de construction)
construction work means the supply of labour, services — including design services — and materials in connection with an improvement. (travaux de construction)
contractor means any person performing construction work under a construction contract with a government institution. (entrepreneur)
dispute means any disagreement between the parties to a construction contract in respect of the interpretation, application, administration or performance of the construction contract. (différend)
government institution means
(a) a department or ministry of state of the Government of Canada, and any body or office listed in Schedule I to the Access to Information Act; and
(b) any parent Crown corporation, and any wholly-owned subsidiary of a Crown corporation, within the meaning of section 83 of the Financial Administration Act. (institution fédérale)
improvement means
(a) any alteration, addition, maintenance, restoration or repair to any real property or immovables;
(b) any temporary or permanent installation, building, structure or works on real property or immovables and any alteration, addition, maintenance, restoration or repair to them, including the installation of equipment that is essential to the normal or intended use of the real property or immovables, installation, building, structure or works; and
(c) the complete or partial demolition or removal of any installation, building, structure or works on real property or immovables. (amélioration)
milestone means a portion of construction work that is identified in a construction contract. (étape)
payee means a contractor or subcontractor entitled to receive payment under a construction contract. (bénéficiaire)
payer means the government institution or any contractor or subcontractor required to make payment under a construction contract. (payeur)
payment includes credit. (paiement)
payment application means any invoice, bill or other request for payment. (demande de paiement)
payment certifier means the person identified in a construction contract who is responsible for the issuance of certificates for payment. (certificateur de paiement)
subcontractor means any person performing construction work under a construction contract with a contractor or with another subcontractor. (sous-traitant)
Application
Application
4 (1) This Act applies in respect of a construction contract made between a government institution and a contractor and any subcontracts related to the construction work provided for in the construction contract.
Laws of Canada
(2) This Act applies in respect of a construction contract whether or not the contract states that the contract is governed by the laws of Canada.
Exclusions
Exclusions
5 This Act does not apply in respect of
(a) an employment contract under which a party undertakes to carry out construction work as an employee of the party for whom the work is performed; or
(b) a construction contract of a class prescribed by regulation.
No Contracting Out
Waiver
6 No person may contract out of or waive any of the rights, obligations or remedies provided for under this Act.
Obligation to Pay Contractor
Progress payment
7 (1) A government institution must make progress payments to a contractor for construction work on a monthly basis or at shorter intervals provided for in the construction contract.
Monthly payment
(2) Where no date for progress payments is provided for in the construction contract, the contractor must submit to the government institution or payment certifier, on the last day of the month, a monthly payment application that sets out a claim for the construction work performed as of that day.
Payment
(3) The government institution must pay the contractor on or before the 20th day following the later of
(a) the last day of the payment period; or
(b) the receipt of the payment application.
Final payment
8 (1) A government institution must make final payment in respect of construction work to the contractor on the date provided for in and in accordance with the construction contract.
Payment
(2) Where no date for final payment is provided for in the construction contract, the government institution must make final payment to the contractor on or before the later of
(a) the 5th day after the issuance of a certificate for final payment by the payment certifier; or
(b) the 15th day after the receipt of the payment application if there is no payment certifier or if the payment certifier fails without sufficient cause to issue a certificate for final payment within 10 days after the receipt of the payment application.
Obligation to Pay Subcontractor
Progress payment
9 (1) A contractor and subcontractor must make progress payments in respect of construction work on a monthly basis or at shorter intervals provided for in the construction contract.
Monthly payment
(2) Where no date for progress payments is provided for in the construction contract, the subcontractor must submit to the contractor or other subcontractor, on the 25th day of the month, a monthly payment application that sets out a claim for the construction work performed by the subcontractor as of that day.
Payment
(3) The contractor must pay the subcontractor or the subcontractor must pay any of its subcontractors on or before the 30th day following the later of
(a) the last day of the payment period; or
(b) the receipt of the payment application.
Final payment
10 (1) A contractor and subcontractor must make final payment in respect of construction work on the date provided for in and in accordance with the construction contract.
Payment
(2) Where no date for final payment is provided for in the construction contract, the contractor or subcontractor must make final payment on or before the later of
(a) the 10th day after the issuance of a certificate for final payment by the payment certifier; or
(b) the 30th day after the receipt of the final payment application if there is no payment certifier or if the payment certifier fails without sufficient cause to issue a certificate for final payment within 10 days after the receipt of the payment application.
Milestone Payments
Contract
11 (1) Any term in respect of a milestone payment in a construction contract between a contractor and subcontractor or a subcontractor and another subcontractor is null and void unless the contract between the government institution and contractor authorizes milestone payments in respect of the improvement.
Notice
(2) Before entering into a construction contract with a subcontractor, a contractor or subcontractor must provide written notice to the subcontractor of any milestone payments relating to the construction work that is to be the subject of the construction contract.
Payment — government institution
12 Where the construction contract between a government institution and a contractor provides for milestone payments, the government institution must make the payment on or before the later of
(a) the 20th day after the achievement of the milestone; or
(b) the 10th day after the issuance of the certificate for payment for the milestone by the payment certifier.
Payment — contractor and subcontractor
13 Where a construction contract between a contractor and a subcontractor or a subcontractor and another subcontractor provides for milestone payments, the payer must make the payment on or before the later of
(a) the 30th day after the achievement of the milestone; or
(b) the 20th day after the issuance of the certificate for payment for the milestone by the payment certifier.
Application
14 Sections 7 and 9 do not apply in respect of construction work that is the subject of milestone payments made in accordance with sections 11 to 13.
Amount of Progress Payment
Amount
15 The amount of a progress payment to which a payee is entitled is
(a) the amount specified under the construction contract; or
(b) where a construction contract does not provide for progress payments, the value of the construction work performed and of the related goods or services supplied on the date of payment for the payment period, relative to the value of the entire construction contract, including the value of all changes.
Deemed Approval of Payment Application
Approval
16 (1) A payment application is deemed approved or certified by the payer or payment certifier on the 10th day after its receipt unless, before that time, the payer or the payment certifier, in a written notice to the payee, disputes the amount in the payment application in whole or in part or requires an amendment to the payment application.
Notice
(2) The notice must set out
(a) the reasons for any dispute or amendment required, including any references to the relevant provisions of the construction contract; and
(b) the amount of payment that is being disputed or in respect of which an amendment is required.
Dispute
(3) The portion of a payment application in respect of which an amount is disputed or an amendment required is limited to
(a) an estimate of the loss, damage or cost of completion or correction of the construction work where the loss, damage or cost is recoverable under the construction contract; and
(b) an estimate of any portion of the value of a change that is the subject of the disagreement where the dispute of a payment application in whole or in part is limited to the value of the change or its method of evaluation.
Holdbacks
(4) Where the payer provides notice for any dispute or required amendment, the payer may only withhold from the payment an amount related to the dispute or required amendment.
Amount
(5) The payer must make a payment in the amount set out in the payment application, minus any amount estimated under subsection (3).
Right to Suspend Performance and Payment
Suspension
17 (1) Where a payer fails to make payment in accordance with this Act,
(a)  if the payee is a contractor, the payee must immediately provide written notice of default to the government institution, with a copy of the notice sent to all subcontractors with whom the contractor has entered into a construction contract for that portion of the improvement in respect of which the payer has failed to make payment; or
(b) if the payee is a subcontractor, the payee must immediately provide written notice of default to the payer, with a copy of the notice sent to the government institution and all subcontractors with whom the subcontractor has entered into a construction contract for that portion of the improvement in respect of which the payer has failed to make payment.
Notice
(2) The payee may suspend performance of construction work seven days after the date of the receipt of the notice of default.
Suspension
(3) Where a payee suspends performance of construction work, the payee may, by written notice to those persons to whom the payee provided notice of default under subsection (1), suspend payment to them.
Default
(4) Where a payee complies with subsections (1) to (3), the deadline for payment by the payee under this Act is extended to the earlier of
(a) the day on which the default is corrected; or
(b) the day on which the default is resolved by settlement or decision of an adjudicator.
Breach
(5) A suspension of payment to those persons to whom the payee provided a written notice does not constitute a breach of the construction contract.
Interest
(6) A contractor or subcontractor whose payment obligation is suspended must pay interest, in accordance with section 18, on the amount of the suspended payment from the date on which the payment would otherwise have been due.
Resumption
(7) Where construction work resumes following a suspension of performance, the party resuming the construction work is entitled to the payment of resumption costs, in addition to any other amounts to which the party is entitled under the construction contract or this Act.
Interest on Overdue Payments
Rate
18 A payer must pay interest on any amount due at the rate provided for in the construction contract or at the rate prescribed by regulation if the construction contract does not provide for a rate.
Right to Terminate a Construction Contract for Non-Payment
Termination
19 (1) A payee who is a contractor or subcontractor undertaking construction work may terminate the construction contract for non-payment of amounts due to the payee in accordance with this Act.
Notice
(2) A payee who intends to terminate a construction contract must provide written notice to the payer.
Payment
(3) The notice must state that if the payer does not make payment within seven days after receipt of the notice, the payee may terminate the construction contract.
Termination
(4) A payee may, without affecting any right of the payee to receive payment under the construction contract, terminate a construction contract if the payer does not make payment within seven days after the receipt of the written notice.
Breach
(5) A termination of a construction contract carried out in accordance with this section does not constitute a breach of the construction contract.
Dispute Resolution
Referral
20 (1) A party to a construction contract may refer any dispute to adjudication in accordance with this section.
Notice
(2) A party who intends to refer a dispute to adjudication must provide a written notice to the other party to the construction contract and to any other persons who must be informed in accordance with the construction contract.
Notice
(3) The notice must
(a) identify the matter in dispute and the relief sought; and
(b) propose a timetable for the adjudication process.
Appointment
(4) The adjudicator is to be appointed in accordance with the construction contract or, if the construction contract does not provide for the appointment, with the agreement of the parties or on application to a court of competent jurisdiction.
Adjudicator
(5) An adjudicator has the same immunity from liability as a judge of the Federal Court.
Decision
(6) A decision of the adjudicator is binding on the parties and is enforceable as a judgment of a court of competent jurisdiction.
Regulations
(7) The Governor in Council may make regulations respecting dispute resolution, including the manner and procedure of the dispute resolution and the enforcement of a decision by an adjudicator.
Right to Information
Request
21 (1) A subcontractor may, at any time and by written notice, require a payer with whom the subcontractor has entered into a construction contract to disclose the due dates for the progress payments and the final payment to the payer under a construction contract that relates to the construction work that is the subject of the construction contract between the subcontractor and the payer.
Payment
(2) Immediately upon receiving a payment, every payer other than a payer who is a government institution must provide notice to each of its payees of the date and amount of the payment received that relates to the construction work performed by the payee.
Notice
(3) The notice must be provided
(a) by letter;
(b) by posting it on a website; or
(c) in any other manner that will allow the payees access to the notice.
Damages
(4) If the payer does not provide the information in accordance with subsection (1) or the notice in accordance with subsection (2) or (3) or knowingly or negligently misstates the information required under subsection (1) or (2), the payer is liable to the payee for any resulting damages.
Court
(5) Upon application by the payee, a court of competent jurisdiction may, by order, require a payer to comply with subsection (1), (2) or (3) and may make any order as to costs that it considers appropriate.
Regulations
Regulations
22 The Governor in Council may make regulations for carrying out the purposes and provisions of this Act.
Coming into Force
Six months after royal assent
23 This Act comes into force six months after the day on which it receives royal assent.
Published under authority of the Senate of Canada