§ 756-A — Obligations

New York § 756-A

• Jurisdiction: New York
• Law GBS: General Business
• Art. 35-E: Construction Contracts

Text

§ 756-a. Obligations. It is the policy and purpose of this article to\nexpedite payment of all monies owed to those who perform contracting\nservices pursuant to construction contracts. Except as otherwise\nprovided in this article, the terms and conditions of a construction\ncontract shall supersede the provisions of this article and govern the\nconduct of the parties thereto.\n 1. Billing cycle. The parties to a construction contract may, by\nmutual agreement, establish a billing cycle for the submission of\ninvoices requesting payment for work performed pursuant to a\nconstruction contract. In the absence of an agreement by the parties as\nto the billing cycle, the billing cycle shall be the calendar month\nwithin which the work is performed.\n 2. Invoices. (a) A contractor shall be entitled to invoice the owner\nfor interim payments at the end of the billing cycle. A contractor shall\nbe entitled to submit a final invoice for payment in full upon reaching\nsubstantial completion, as such term is defined in the contract or as it\nis contemplated by the terms of the contract.\n (i) Upon delivery of an invoice and all contractually required\ndocumentation, an owner shall approve or disapprove all or a portion of\nsuch invoice within twelve business days. Owner approval of invoices\nshall not be unreasonably withheld nor shall an owner, in bad faith\ndisapprove all or a portion of an invoice. If an owner declines to\napprove an invoice or a portion thereof, it must prepare and issue a\nwritten statement describing those items in the invoice that are not\napproved. An owner may decline to approve an invoice or portion of an\ninvoice for:\n (1) Unsatisfactory or disputed job progress;\n (2) Defective construction work or material not remedied;\n (3) Disputed work materials;\n (4) Failure to comply with other material provisions of the\nconstruction contract;\n (5) Failure of the contractor to make timely payments for labor\nincluding collectively bargained fringe benefit contributions, payroll\ntaxes and insurance, equipment and materials, damage to the owner, or\nreasonable evidence that the construction contract cannot be completed\nfor the unpaid balance of the construction contract sum; or\n (6) Failure of the owner's architect to certify payment for any or all\nof the reasons set forth in this section so long as the reasons are\nincluded in the owner's written statement of disapproval.\n (ii) Upon delivery of an invoice and all contractually required\ndocumentation, a contractor or subcontractor shall approve or disapprove\nall or a portion of such invoice within twelve business days. Contractor\nand subcontractor approval of invoices shall not be unreasonably\nwithheld nor shall a contractor or subcontractor, in bad faith,\ndisapprove all or a portion of an invoice. Nothing in this section shall\nprohibit the contractor or subcontractor, at the time of application to\nthe owner or contractor, from withholding such application to the owner\nor contractor for payment to the subcontractor or material supplier for:\n (1) Unsatisfactory or disputed job progress;\n (2) Defective construction work or material not remedied;\n (3) Disputed work;\n (4) Failure to comply with other material provisions of the\nconstruction contract; or\n (5) Failure of the subcontractor to make timely payments for labor\nincluding collectively bargained fringe benefit contributions; payroll\ntaxes and insurance, equipment and materials, damage to contractor or\nanother subcontractor or material supplier, or reasonable evidence that\nthe subcontract cannot be completed for the unpaid balance of the\nsubcontract sum.\n (b) Nothing in this subdivision shall authorize the withholding of an\napplication to the owner or contractor for the payment to a\nsubcontractor or material supplier when due to a delay in job progress\nby the owner, contractor or another subcontractor or material supplier\nother than the applicant or applicant's subcontractor or material\nsupplier.\n 3. Payment. (a) The owner's payment of a contractor's interim and\nfinal invoices shall be made on the basis of a duly approved invoice of\nwork performed and the material supplied during the billing cycle.\n (i) Unless the provisions of this article provide otherwise, the owner\nshall pay the contractor strictly in accordance with the terms of the\nconstruction contract.\n (ii) Payment of an interim or final invoice shall be due from the\nowner not later than thirty days after approval of the invoice.\n (iii) If payment by the owner is contingent upon lender approval,\npayment of a contractor's interim or final invoice or the amount of loan\nproceeds disbursed by the lender for payment of the contractor's interim\nor final invoice shall be due from the owner seven days after receipt by\nthe owner of good funds except where the provisions of section seven\nhundred fifty-six-d of this article applies.\n (iv) An owner may withhold from an interim payment only an amount that\nis sufficient to pay the costs and expenses the owner reasonably expects\nto incur in order to cure the defect or correct any items set forth in\nwriting pursuant to subparagraph (i) of paragraph (a) of subdivision two\nof this section, or in the alternative, to withhold an amount not to\nexceed the line item amount appearing in the agreed schedule of values\ntogether with any change orders, additions and/or deletions, if such\nschedule has been previously submitted, and/or an amount sufficient to\ncover liquidated damages as established in an agreed upon schedule in\nthe construction contract.\n (b) The contractor or subcontractor's payment of subcontractor or\nmaterial supplier's interim or final invoice shall be made on the basis\nof a duly approved invoice of the work performed and materials supplied\nduring the billing cycle.\n (i) Unless the provisions of this article provide otherwise, the\ncontractor or subcontractor shall pay the subcontractor strictly in\naccordance with the terms of the construction contract. Performance by a\nsubcontractor in accordance with the provisions of its contract shall\nentitle it to payment from the party with which it contracts.\nNotwithstanding this article, where a contractor enters into a\nconstruction contract with a subcontractor as agent for a disclosed\nowner, the payment obligation shall flow directly from the disclosed\nowner as principal to the subcontractor and through the agent.\n (ii) When a subcontractor has performed in accordance with the\nprovisions of its construction contract, the contractor shall pay to the\nsubcontractor, and each subcontractor shall in turn pay to its\nsubcontractors, the full or proportionate amount of funds received from\nthe owner for each subcontractor's work and materials based on work or\nservices provided under the construction contract, seven days after\nreceipt of good funds for each interim or final payment, provided all\ncontractually required documentation and waivers are received.\n (iii) A contractor or subcontractor may withhold amounts received from\nan owner in connection with an interim payment due to a subcontractor or\nmaterial supplier only such sums that are sufficient to pay the direct\nexpenses as are reasonable to correct deficiencies identified pursuant\nto subparagraph (ii) of paragraph (a) of subdivision two of this\nsection, or in the alternative, to withhold an amount not to exceed the\nline item amount appearing in the agreed schedule of values, together\nwith any change order, additions or deletions, if such schedule has been\npreviously submitted.\n (iv) If a contractor, after submitting an invoice to an owner under a\nconstruction contract, but before making a payment to a subcontractor or\nmaterial supplier for the subcontractor's or material supplier's\nperformance covered by such invoice, discovers that all or a portion of\nthe payment otherwise due to the subcontractor or material supplier is\nsubject to withholding from the subcontractor or material supplier in\naccordance with the construction contract and the conditions set forth\nin subparagraph (ii) of paragraph (a) of subdivision two of this\nsection, then the contractor shall:\n (1) As soon as practicable upon ascertaining the cause giving rise to\na withholding, but prior to the due date for a subcontractor or material\nsupplier payment, furnish to the subcontractor or material supplier and\nthe owner written notice of withholding specifying conditions for\nwithholding payment and identifying the amount to be withheld;\n (2) Reduce the subcontractor's or material supplier's interim payment\nby an amount not to exceed the amount specified in the notice of\nwithholding; and\n (3) Pay the subcontractor or material supplier amounts withheld within\nseven days after correction of the identified subcontractor or material\nsupplier performance deficiency and receipt of all required\ndocumentation and waivers, unless the funds therefor must be obtained\nfrom the owner's next interim payment due to a reduction in the\ncontractor's billing directly resulting from the subcontractor's or\nmaterial supplier's performance deficiency identified in the notice of\nwithholding.\n (c) A written notice of any withholding under this subdivision shall\nbe issued to a subcontractor or material supplier specifying:\n (i) The amount to be withheld;\n (ii) The specific causes for withholding under the terms of the\nconstruction contract and pursuant to this subdivision;\n (iii) The remedial actions necessary to be taken by the subcontractor\nor material supplier in order to receive payments of the amounts\nwithheld; and\n (iv) The documentation and waivers required.\n 4. Notice. A contractor or subcontractor shall disclose to a\nsubcontractor, at the time the construction subcontract is entered into,\nthe due date for receipt of payments to the contractor or subcontractor\nfrom the owner or the contractor as the case may be. If a contractor or\nsubcontractor fails to accurately disclose the due date to a\nsubcontractor, the contractor or subcontractor shall be obligated to pay\nthe subcontractor as though the due dates established in paragraph (a)\nof subdivision three of this section were met by the owner. In addition,\nupon written request of a subcontractor, the owner shall provide notice\nto such subcontractor within five days of making any interim or final\npayment to the contractor. The subcontractor's request shall remain in\neffect for the duration of the subcontractor's work on the project.\n