This note, the 2^nd of 4 from the London District Construction Association, deals directly with an ongoing issue that needlessly causes payment delays, “Improper Invoices”.  

When prompt payment applies (see Note 1), the owner has an obligation to pay a "proper invoice" within 28 days in the ordinary course.  Invoices can be rejected out of hand if they are not a "proper invoice". 

Three Steps To a "Proper Invoice" success

Step 1: Make sure that your invoices meet the minimum criteria of a "proper invoice" as set out in section 6.1 of the Construction Act (Act) (and which will change once Bill 216 (an update to the Act) comes into force).   Set out below is the current definition of proper invoice (The changes that will come into effect when Bill 216 (B216) is proclaimed into force are in red.):       

1. The contractor’s name and address.
2. The date of the proper invoice and the period during which the services and/or materials were supplied. (B216 2. The date of the invoice and the period, milestone or other contractual payment entitlement to which the invoice relates.)
3. Information identifying the authority, whether in the contract or otherwise, under which the services and/or materials were supplied. (B216 3. Information identifying the contract or other authorization under which the services or materials were supplied, such as a contract number, contract line-item number or purchase order number.
4. A description, including quantity where appropriate, of the services and/or materials supplied.
5. The amount payable for the services and/or materials supplied, and the payment terms.
6. The name, title, telephone number and mailing address of the person to whom payment is to be sent. (B216 6.The name, title, mailing address and telephone number of the person to whom payment is to be sent or, if payment is to be sent to an office or department, its name, mailing address and telephone number.

B216 6.1 Any other information that is necessary for the proper functioning of the owner’s accounts payable system that the owner reasonably requests.)

7. Any other information that may be prescribed. 2017, c. 24, s. 7.

Most invoices meet most of these criteria, but few meet all the requirements of a proper invoice.  Set out below are some common mistakes: 

1. Many invoices do not identify the “authority” pursuant to which they rendered, which could be a PO number, a contract number, or a contract date.
2. Few invoices identify the “period” over which the materials and/or services were supplied.
3. Most invoices include the wrong terms of payment, which should always be 28 days except for your holdback invoice, which should be 61 days from the date your contract is complete or a certificate of substantial performance is published.
4. Very few invoices include the “name, title, telephone number and mailing address” of the person to whom payment is to be sent.

Step 1 to success: Meet the minimum criteria for a “proper invoice” set out in the Act.   

Step 2: Meet any contract specific requirements for a "proper invoice".  The Act allows the parties to expand upon the minimum criteria of a "proper invoice".  Statutory declarations, updated WSIB clearance certificates, and invoices for materials supplied, are three of many potential contract specific requirements for a "proper invoice". Make it part of your practice to review the prime contract for any additional invoicing requirements. 

Step 3: Ensure you deliver your “proper invoice” in the manner directed by the contract and/or the owner.  Get delivery direction from the contract or owner and follow it.  

Lastly, remember that the concept of a "proper invoice" only applies between an owner and a prime contractor.  The Act is silent on the form of invoices delivered by a subcontractor to a prime contractor.  Subcontractors should, of course, comply with any subcontract requirement for their invoices to the contractor.     

Please note that Bill 216 deems any invoice rendered by a contractor to an owner to be a “proper invoice” unless the owner objects to the form of invoice within 7 days. 

To be paid promptly make your invoices proper, as per the three-step process.

LDCA suggests you share this note broadly with all the construction participants you know. Our next note will address Disputes Resolution/Adjudication. We hope this note provides guidance for appropriate behaviour, as effective relations between buyers and sellers is the cornerstone of a mutually beneficial outcome.

Mike Carter

CEO

London District Construction Association

Special thanks to Ted Dreyer; Lawyer, Adjudicator, Director (GVCA and COCA), and Author for his “Three Step process”