Where architects, engineers or quantity surveyors perform services at risk and have given no open-ended commitment to work unpaid, at what point does a right to payment arise?
Risk-basis work pays only if the scheme proceeds, but it can outgrow what was expected. Whether a right to payment arises turns on whether the risk arrangement has ended and a chargeable agreement has taken its place.
There is no fixed rule: work done on a risk basis is not paid for if the project does not proceed, but where the risk arrangement ends and a binding agreement to pay is formed, later work must be paid for, as in Latchin v General Mediterranean Holdings, so the extent of the risk work and the point at which payment begins should be defined in writing
There is no fixed rule. Work done on a risk basis is not paid for if the project does not proceed, but where the risk arrangement ends and is replaced by an agreement, express or to be inferred, that further work will be paid for, that later work must be paid. In Latchin (t/a Dinka Latchin Associates) v General Mediterranean Holdings SA an architect's earlier design work was admittedly on a risk basis, but the judge found on the facts that a binding contract had been formed on a particular date, so that work done after that date was to be paid for while earlier work remained at risk, a finding upheld on appeal. Because there is no rule fixing when risk work ends and paid work begins, the extent of the risk services should be defined in writing at the outset, and where the arrangement ends and chargeable work begins, a letter should record the change and the basis of the charges, agreed with the employer, to avoid a dispute on poorly recorded facts.
| No fixed rule | No hard rule on when risk work ends and paid work begins |
| Risk work | Not paid for if the project does not proceed |
| The change | A binding agreement to pay for further work makes later work chargeable |
| Latchin | A contract formed on a date; work after it was paid, before it at risk |
| Record it | Define the risk work and the change in writing to avoid a dispute |
The rest of this solution is for members
Fifty of the two hundred contractual solutions are free to read. This is one of the remaining hundred and fifty, which Premium and Pro carry.
See what Premium includesAlready a member? Sign in