Prompt payment
Also: Prompt payment legislation, Notice of non-payment, Proper invoice
Quick definition: Legislation that sets mandatory deadlines for paying construction invoices down the contract chain and gives unpaid parties fast remedies, such as adjudication.
Explanation
Beginner explanation
Prompt payment laws force owners to pay contractors, and contractors to pay their trades, within fixed numbers of days — or to say formally, and early, why they will not.
Technical explanation
In Ontario, prompt payment provisions of the Construction Act came into force on 1 October 2019 for projects procured after that date. An owner must pay a proper invoice within 28 days of receipt, unless it delivers a notice of non-payment within 14 days stating the reasons; undisputed amounts must still be paid. Contractors must pay subcontractors within 7 days of receiving payment. Owners cannot make consultant certification a precondition for submitting a proper invoice. Disputes go to adjudication. Federally, the Federal Prompt Payment for Construction Work Act took effect on 9 December 2023 for federal real property, with 28-day and 7-day timelines and its own adjudication regime. Several other provinces have similar legislation.
Practical example
A contractor delivers a proper invoice to a municipal owner on 3 June. The owner disputes $40,000 of a $600,000 invoice and issues a notice of non-payment on 12 June, then pays the undisputed $560,000 by 1 July. The contractor pays its trades their share within 7 days.
Why it matters
Prompt payment changes the rhythm of construction administration: invoices, consultant reviews and dispute notices now run on statutory clocks.
Standards and references
- Getting ready for prompt payment in Ontario. Gowling WLG, 2019.Widely accepted professional interpretation
Supports: Ontario: in force 1 Oct 2019; 28 days to pay proper invoice; notice of non-payment within 14 days; 7 days to pay subcontractors; no pre-approval or certification precondition; transition rules - Canada's federal prompt payment legislation now in force. Miller Thomson LLP, 2023.Widely accepted professional interpretation
Supports: Federal Prompt Payment for Construction Work Act in force 9 Dec 2023; scope; 28-day and 7-day timelines; adjudication - R.S.O. 1990, c. C.30 — Construction Act, R.S.O. 1990, c. C.30. Government of Ontario.Original VDC Stack.io wording, based on the standard
Supports: Statutory basis (Part I.1 prompt payment) · Status: Amended 2018–2019 (prompt payment and adjudication in force 1 October 2019). The e-Laws page could not be read by the research tools; section references need editor confirmation.
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VDC Stack.io. (2026). Prompt payment. In VDC Stack.io Knowledge Dictionary. Retrieved from https://vdcstack.io/dictionary/prompt-payment/