Breaking The Chain: Legal Risks In Disrupting The Construction Payment Hierarchy

Cash flow is the lifeblood of Ontario's construction industry that keeps projects moving and businesses afloat. Maintaining consistent payment cycles can make the difference between a project's success and financial strain. Payment delays have the unfortunate consequence of rippling down the supply chain – affecting general contractors, subcontractors, and suppliers alike – creating challenges that can halt progress and increase risk. Understanding how construction payments work and the legal risks that can result from breaking the payment chain is key to ensuring that money keeps flowing.

Payment Flow and Prompt Payment

Construction payment hierarchy is structured as a "pyramid", regulated by Ontario's Construction Act, which establishes a mandatory prompt payment regime ensuring funds flow from the top (owner) down to the bottom (suppliers).