Québec Government Adopts The Regulation Respecting Prompt Payments And The Prompt Settlement Of Disputes With Regard To Construction Work

On July 16, 2025, the Québec government adopted the Regulation respecting prompt payments and the prompt settlement of disputes with regard to construction work (the "Regulation"), for which the government had published draft versions in July 2024 and April 2025. The Regulation implements a formal prompt payment and dispute resolution regimes for public construction projects and is part of the legislative changes introduced by the adoption in 2022 of the Act mainly to promote Québec-sourced and responsible procurement by public bodies, to reinforce the integrity regime of enterprises and to increase the powers of the Autorité des marchés publics. It aimed to foster responsible procurement practices by public bodies, increase transparency in public contracting, and ensure fairer treatment of construction industry stakeholders.

The Regulation mainly comes into force on September 8, 2025, but it will only come into force for the contracts listed below and their related subcontracts as of the following dates:

Now that the Regulation comes into force, an overview of the Regulation's key provisions is set out below.

Scope of Application

The Regulation applies to public construction contracts in Quebec and to both contractors and subcontractors, whether directly or indirectly involved in the contractual chain. It also applies to service providers, and any reference to subcontracted work extends to subcontracted services, particularly where a general contractor has subcontracted professional services under a mixed contract involving construction and professional services or a contract for energy efficiency improvement services.

Certain contracts are exempted from this regime, specifically contracts concluded in emergency situations, where the safety of persons or property is at risk. Additionally, certain contracts entered into by the Ministère des Transports et de la Mobilité durable or the Société Québécoise des Infrastructures are also excluded, provided they meet two criteria at the time of their conclusion: (1) the work must be completed within a continuous period of three months or less, and (2) payment under the contract will be made in a single sum.

Prompt Payment

The Regulation provides for standardized rules and timelines for processing payment requests. Persons requesting a payment will be required to submit a request for payment containing specific information, namely¹:

• a detailed description of the work performed, expenses incurred, and any other claimed sums;
• the periods associated with each work item and expense; and
• the total sum claimed with a breakdown by item and expense.

The debtor may allow a contractor to correct any deficiency in a request for payment².

Depending on the nature of the debtor, different timelines to make the payment will need to be followed³:

• For a public body, the payment must be made by the last day of the month in which the payment request is received;
• For a contractor, payment is due by the fifth day of the second month following the month in which the payment request is received; and
• For a subcontractor (a party to a subcontract directly tied to a public contract), payment is due by the tenth day of the second month following the month the payment request is received.

Where multiples levels of subcontracting are involved and the subcontracting chain extends beyond two levels, an additional five-day delay is added for each additional level.

Importantly, if a debtor refuses to pay all or part of the sum due, it must provide a written notice to that effect to the other party⁴:

• For a public body, no later than the 21^st day of the month;
• For a main contractor, no later than the last day of the month; and
• For a subcontractor, not later than the day before it sends its own request for payment.

Deductions and Withholdings

The Regulation sets out specific rules regarding deductions and withholdings in the contractual chain.

With respect to payments owed to subcontractors, a contractor may deduct amounts equivalent to what has been claimed for work rejected by another debtor in the contractual chain, provided the contractor has previously transmitted a copy of the refusal notice on which the deduction is based⁵. Both public bodies and contractors may also deduct from payments the sum stipulated in a penalty clause included in their contracts.

A public body may withhold sums due to a contractor in the following circumstances:

• Up to 10% of the sum payable as security to guarantee contract performance, and in such case, a contractor may also withhold a portion of the payment due to its subcontractors, provided that such withholding rights are included in the relevant contracts⁶;
• Sufficient amount to cover reservations made concerning apparent defects or deficiencies in the work, unless the contractor has already provided sufficient performance security for defects and deficiencies⁷;
• Sums necessary to repair damages to the work caused by the contractor or subcontractors, unless the contractor has already provided sufficient performance security for such damages⁸;
• Sums to ensure subcontractor claims are satisfied by the contractor or to allow the public body to pay such claims directly, regardless of whether subcontractors can invoke a legal hypothec or not⁹;
• Sums sufficient to satisfy claims from persons other than the contractor's subcontractors who assert a legal hypothec¹⁰; and
• Up to the entire final payment if the contractor fails to provide the required completion documents¹¹.

Additionally, a contractor party to a public subcontract may retain all or part of a sum payable to its creditor under the conditions agreed in writing between the parties and if the withholding does not duplicate a withholding exercised by the public body¹².

Prompt Dispute Settlement

The Regulation also introduces a confidential streamlined process to resolve disputes under these public construction contracts with a third-party decider. The prompt dispute settlement regime applies to disputes relating to various matters, including¹³:

• The validity of a request for payment, as well as the compliance or justification of a payment refusal, deduction, or withholding;
• The existence or value of a change in the scope of work;
• The due payment of a sum of money; and
• Issues related to the application or interpretation of the contract, subcontract, or applicable regulatory framework.

To initiate the process for the intervention of a third-person decider, a party must notify the other contracting party of a request for intervention¹⁴:

• If the dispute arises from a public contract, within 90 days after the acceptance of the work without reservations, or if the work has been accepted with reservations, within 90 days after the public body declares itself satisfied with the repairs or corrections made to the work; or
• If the dispute arises from a public subcontract, within 90 days following the agreed-upon completion date of the work as outlined in the subcontract.

Once appointed, the third-person decider must follow the procedure set out in the Regulation, including the delays for each party to submit their claim and response and the procedure for the hearings. Generally, the third-person decider must render a written decision on the merits within 50 days of being appointed¹⁵.

If the decision provides for the payment of a sum of money, such payment must be made within 20 days of the decision's notification¹⁶. In addition, if a contractor is entitled to the payment of a sum of money, it must notify its subcontractors as soon as possible of the amount awarded and the share of the amount owed to each subcontractor, and it must pay the sum of money within five days after receiving the payment¹⁷.

It is worth noting that a dispute cannot be resolved under this regime in several situations, such as¹⁸:

• A dispute has already been resolved by a third-party decider;
• The issue at the core of the dispute has previously been adjudicated following the withdrawal of a party;
• A party has already submitted a request for intervention regarding the same dispute and one of the following conditions applies: the request was voluntarily withdrawn after the appointment of a third-party decider; the request was deemed to have been withdrawn; or a third-party decision-maker has already issued a ruling indicating either that the party is barred from seeking resolution for that dispute or has abused the right to do so; or
• The dispute in question is already the subject of an ongoing judicial or arbitral procedure between the parties.

Prompt dispute settlement scheme

*The third-party decider may extend the time limit by 15 days or for a longer period if the parties agree.

Conclusion

The Regulation's adoption will introduce a major change in the way most new public contracts are managed. The Regulation will not apply to ongoing contracts or contracts to be awarded following calls to tender issued before the date on which the Regulation comes into effect. Nonetheless, all relevant stakeholders should familiarize themselves with this new regime in advance of the date the new measures become applicable.

Footnotes

1 Regulation, s. 5

2 Ibid, s. 6.

3 Ibid, s. 15.

4 Ibid, s. 10.

5 Ibid, s. 16-17.

6 Ibid, s. 20.

7 Ibid, s. 22.

8 Ibid, s. 23.

9 Ibid, s. 25.

10 Ibid, s. 26.

11 Ibid, s. 28.

12 Ibid, s. 29.

13 Ibid, s. 36.

14 Ibid, s. 35.

15 Ibid, s. 63.

16 Ibid, s. 67.

17Ibid, s. 65 and 66.

18 Ibid, s. 35.

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