Are they able to do this?

ABC Construction is in a contract with DEF Developers to deliver the construction of 40 new houses on a new housing estate. There is a ‘Payment is of the Essence clause’ in the contract. They are halfway through the project and DEF Developers have failed to pay ABC Construction for the work already completed. ABC Construction have downed tools and walked off site.

Are they able to do this?
A . no- the contract has not been completed and therefore ABC must continue working
B. no- as long as payment is received at some point during the term of the contract ABC has no right to stop working
C. yes- ABC have the right to down tools as there has been a breach in contract
D. yes- it is a legal requirement to pay construction firms at regular intervals during a contract

View Answer

Answer: C

Explanation:

Yes- ABC can down tools as there has been a breach in contract. The ‘Payment is of the Essence’ clause is key- from a legal perspective is something is ‘of the essence’ it is fundamental to the contract and therefore failure to do it results in breach of the contract and the injured party can claim damages. You’ll have come across ‘time is of the essence’ clauses in level 4. This is basically the same thing just with payment. P.129