Moorestown, New Jersey Business Law Attorneys
In 2006, the New Jersey Legislature amended the Prompt Payment Act, a law that allows contractors, subcontractors, and suppliers to demand prompt payment for services rendered. Under the terms of the Prompt Payment Act, a project owner must pay a contractor within 30 days of receipt of a bill after it has been approved and certified. A bill is considered “approved and certified” if 20 days after receiving it, the project owner has not objected to the bill. If an owner objects to a bill, he or she must do so in writing, specify the amount of pricing he or she disputes, and provide reasons for why the cost is objectionable.
Paying Interest under New Jersey’s Prompt Payment Act
Under the Prompt Payment Act, interest on unpaid bills is charged at the prime rate plus 1% if a payment is not received within the time period specified under the provisions of the Act. Further, if a contractor does not receive a statement specifying why payment is being withheld and if the owner fails to make a good faith effort to resolve these reasons, the contractor (or subcontractor or supplier) can suspend work on a project within 7 days of providing a written notice. Additionally, under the provision of the Act, the party that sues and wins is entitled to any award granted as well as attorney’s fees for legal costs associated with taking legal action.
Prime Contractors and Subcontractors under the Prompt Payment Act
Under the provisions of the Prompt Payment Act, prime contractors must pay subcontractors (and subcontractors must be sub-subcontractors) within 10 days of receiving payment on a contract. If, however, the contract between prime contractors and subcontractors (or subcontractors and sub-subcontractors) specifies different payment terms, then this provision does not apply.
When payment is provided, it must be for the full amount received for the work paid to the prime contractor or subcontractor. If payment isn’t provided, prime contractors and subcontractors are not necessarily obligated to provide a reason for withholding payment. However, if written notification and justification is not provided, a subcontractor or sub-subcontractor can suspend work until they are paid.
Disputes under the Prompt Payment Act
Unpaid contractors, subcontractors, and sub-subcontractors can choose to resolve a dispute through alternate dispute resolution (ADR). Under ADR, parties enter into mediation, represented by legal counsel, and use an impartial mediator to try and reach mutually agreeable terms for settling a payment dispute. While there are certain advantages associated with mediation, if an agreement can’t be reached you may end up spending more money by taking your case to court in any case. As such, mediation is often a good option when the parties involved are willing to work together to settle a dispute and resolve an alleged breach of contract.
Contact Moorestown New Jersey Business Law Attorneys
If you’re involved in a payment dispute regarding a contract, contact Moorestown, New Jersey construction law attorneys at LaVan Law today. We can evaluate your case and discuss the best legal options available to you.