Prohibition of conditional payment provisions
12.—(1) A provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective, unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent.
(2) For the purposes of this Article a company becomes insolvent—
(a)on the making of an administration order against it under Part III of the [1989 NI 19.] Insolvency (Northern Ireland) Order 1989,
(b)on the appointment of an administrative receiver or a receiver or manager of its property under Part IV of that Order,
(c)on the passing of a resolution for voluntary winding-up without a declaration of solvency under Article 75 of that Order, or
(d)on the making of a winding-up order under Part V or Part VI of that Order.
(3) For the purposes of this Article a partnership becomes insolvent on the making of a winding-up order against it under any provision of the [1989 NI 19.] Insolvency (Northern Ireland) Order 1989 as applied by an order under Article 364 of that Order.
(4) For the purposes of this Article an individual becomes insolvent on the making of a bankruptcy order against him under Part IX of the Insolvency (Northern Ireland) Order 1989.
(5) A company, partnership or individual shall also be treated as insolvent on the occurrence of any event corresponding to those specified in paragraph (2), (3) or (4) under the law of England and Wales, or of Scotland, or of a country outside the United Kingdom.
(6) Where a provision is rendered ineffective by paragraph (1), the parties are free to agree other terms for payment.
In the absence of such agreement, the relevant provisions of the Scheme apply.