Payment Terms Legislation In Canada

The Federal Prompt Payment for Construction Work Act made changes to the Construction Act limiting payment terms for federal projects to 42 days being, 28 days for payment to the prime contractor, 7 days for following payments to subcontractors and a further 7 days for those sub-contractors to pay their suppliers. Each Canadian province has or is in the process of setting additional late payment law for construction.

In the province of Ontario, the Construction Act requires payment of proper invoices no later than 28 days after receipt, with 14 days for dispute resolution. Contractors must pay subcontractors within 7 days of receiving payment, with 7 days for dispute resolution.

In the province of Saskatchewan, amendments to the Builder’s Lien Act require payment of proper invoices no later than 28 days after receipt, with 14 days for dispute resolution. Contractors must pay subcontractors within 7 days of receiving payment, with 7 days for dispute resolution.

In the province of Alberta, the Builder’s Lien Amendment Act requires monthly billings for construction projects, issued at least every 31 days. The maximum payment term for these invoices is 28 days after receipt, with 14 days for dispute resolution. Contractors must pay subcontractors within 7 days of receiving payment, with 7 days for dispute resolution.

In the province of Manitoba, the Prompt Payment for Construction Act requires invoicing for progress payments on a monthly basis. All proper invoices must be paid within 20 days of approval, including the final payment. Subcontractors must also submit monthly invoices and payment must be made on the earlier of 7 days from receipt of funds or 27 days after the invoice is approved.

Appendix TP1 of the General Conditions of a Service Contract with the Public Services Commission of Canada sets a standard term of 30 days for public service contracts.

The grain financial protection program in Canada requires licensees to make payments to producers and owners within 10 days for sales on delivery, although deferrals are possible.

Late payment interest must be agreed between the parties in a commercial contract in Canada. Where late payment interest is stipulated but no rate is agreed the Interest Act sets a default of 5%. If an agreed rate is set as a monthly rate it cannot exceed 5%. Rates over 60% per annum are also null and void and considered “criminal rates”. If no interest is stipulated in contract then interest can be recovered only through the court system.