STOPPED CHEQUE CAUSES PAYMENT DISPUTE

Construction legal adviceWe all at some time or other have made a purchase, paid by cheque and shortly after discovered that we have paid over the odds. One reaction may be to stop the cheque return the goods and make a less expensive purchase elsewhere. The recent case of Isovel Contracts Ltd v ABB involves a dispute concerning payment by cheque for construction work. The work involved the construction of a Leisure Centre where ABB were subcontractors who carried out the mechanical and electrical work some of which they sub-subcontracted to Isovel. An application for payment was made by Isovel and a cheque in the sum of £70,000 issued by ABB in payment for the work.

It appears that under the terms of the sub-subcontract Isovel were entitled to payment of sums paid to ABB under the main contract by Miller Construction. After ABB had issued the cheque to Isovel it became clear that Miller had reduced the value of the mechanical and electrical work due to non-compliance. ABB then stopped the cheque made out to Isovel on the basis that the value of the work done by Isovel merited a nil valuation. Isovel commenced proceedings for the payment of the cheque.

The judge in the case explained that a cheque is like a bill of exchange and is as good as cash in the hand. Once issued the party who issued the cheque is not entitled to argue that the goods have no value and therefore there is no consideration for the payment, nor can a counterclaim be used to avoid payment. ABB were therefore required to make payment of the sum of £70,000 to Isovel.

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