Work statements, interim invoices and retention: construction payments depend on the contract

Construction disputes rarely concern whether payment is required; they concern when it is due. Works contracts often address price and deadlines in detail but leave billing to habit: statements are prepared, invoices are sent and retention will eventually be released. That works while relations are good. At the first disagreement, the precise wording controls—and often reveals gaps.

The statutory starting point: entitlement to payment arises on completion

The Commercial Code (Act No. 513/1991 Coll.) leaves payment arrangements largely to the contract. The client pays the agreed price or a price determined by the agreed method (section 546). A default rule governs payment timing:

Unofficial English translation: The client must pay the contractor the price at the time agreed in the contract. Unless the contract or this Act provides otherwise, entitlement to the price arises upon performance of the work.

— Section 548(1) of the Commercial Code

On a construction project, the entire price is not normally left until the end. Contracts divide payment into interim invoices linked to statements of completed work. An accounting aid thus becomes a legal mechanism governing cash flow throughout the project.

Work statements as the basis for interim payments

A statement of completed work lists what the contractor actually performed during a period, using the breakdown and prices in the budget. A well-drafted contract gives it three roles: supporting an interim invoice, documenting progress and providing ongoing evidence for a possible dispute. If payment is conditional on a client-approved statement, approval is a condition precedent to payment becoming due. Without an approved statement, the invoice does not fall due even though the work was done. Statements should include approved variations and additional work, discussed in our advice on additional work and budget overruns.

Approval: objection deadlines and deemed acceptance

A common gap is requiring the client to approve a statement without specifying when or what happens if it remains silent. The contractor cannot invoice, while the client need do nothing. The law will not resolve that contractual deadlock for the parties. Combine a deadline for objections to specific items with deemed acceptance: a statement not challenged within the deadline is treated as approved. Objections should affect only disputed items so the remainder can be invoiced. This mechanism rests on the contract itself and prevents approval from being delayed indefinitely.

Retention: agree the amount, purpose and release date

Retention is an agreed part of each invoice payable only after handover or correction of defects identified during acceptance. It gives the client security for completion but ties up the contractor’s margin. Define its calculation base, any separate portions, the conditions for releasing each portion and the final release deadline. Allowing the contractor to replace retention with a bank guarantee can be a useful compromise.

Consider its relationship with defects. Defective performance does not extinguish the payment obligation; the obligation changes into rights arising from liability for defects (section 324(3) of the Commercial Code). The client therefore has no basis for withholding an entire invoice. Withholding an amount corresponding to its defect claims may be defensible, and only for defects properly notified in time. Our advice on defects arising from the client’s instructions explains when the contractor has no liability for defects.

Use without a handover report does not automatically postpone payment

What if the client uses the work but has not signed the handover report? The answer depends on what the contract makes conditional on that document. If formal documented handover is not an agreed condition, handover can occur in fact when the contractor enables the client to take control and the client starts using the work. Insisting on paperwork would favour a client who delays signing while using the result. This was how the lower courts assessed the dispute subsequently brought before the Slovak Supreme Court under case No. 3MObdo/1/2014. The Supreme Court rejected the extraordinary appeal because the subsidiarity requirement had not been met and therefore did not review that view on its merits. The position is assessed differently if the contract makes a signed report a condition of handover. Our advice on an unsigned handover report explains the mechanism and available responses.

Setting up the billing arrangements

In a construction contract, we set work statements, deadlines, deemed acceptance and retention so payments continue and disagreements follow clear rules. Our general works contract service covers the broader framework. For ongoing projects and billing disagreements, we provide legal support for construction companies. When money is already being withheld, we handle construction defect disputes. Reviewing the payment mechanism before signing is faster than litigating when payment became due.