A study of security of payment in the Hong Kong construction industry

Pao Yue-kong Library Electronic Theses Database

A study of security of payment in the Hong Kong construction industry


Author: Fan, Lap-kai
Title: A study of security of payment in the Hong Kong construction industry
Degree: M.Sc.
Year: 2010
Subject: Hong Kong Polytechnic University -- Dissertations
Construction projects -- Finance
Department: Dept. of Building and Real Estate
Pages: viii, 115, xxiv leaves ; 30 cm.
InnoPac Record: http://library.polyu.edu.hk/record=b2391107
URI: http://theses.lib.polyu.edu.hk/handle/200/5954
Abstract: Most disputes found in construction projects are due to payment problems. The aim of this dissertation is to understand what security of payment is and how security of payment can be improved through legislation or contractual provisions in the Hong Kong construction industry. The scope of this study is focus on the contractor perspective. The research has taken view points of academic, practical, and legal aspects i.e. reviewing literature, conducting a pilot interview and five interviews with practitioners and researchers, and studying six payment dispute court cases, respectively. The Objectives set for study have all achieved. The first objective is an understanding of payment problems and the 10 causes due late payment, under payment and non-payment which are found in main contracts and / or subcontracts. The second objective is to review the methods for dispute resolution. In practice, it is commonly used the dispute resolution methods in order of negotiation, mediation and arbitration. Litigation is least favourable and adopted for settlement of some non-payment disputes. The third objective is reviewing contractual and legislative measures for security of payment in construction projects. Getting the contract right is the most effective measure. Effective contract administration and documentation control help to agree project payments and avoid late or under payment. Problems of payment practice in subcontracts like back-to-back, pay-if-paid, pay-when-paid are found in court cases. Lastly, recommendations are made for consideration. Generally we can consider improving contract writing and introducing new legislation to forbid using the terms such as back-to-back, pay-if-paid and pay-when-paid into any construction contracts. Hong Kong is a free economy market consideration of contractual provisions is recommended.

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