Using the law without a Lawyer-practical guide to using the Prompt Payment Law

Tough economic times call for different strategies.  My father was born before the great depression.  He started an advertising business that he later sold to McMillan Publishing.  If he wanted a letter typed, he typed it himself, if he needed a letter mailed, he typed the envelope and mailed it himself, if he needed to make a sale, he made the call himself.   

When I graduated law school, naturally I asked him if he ever used a lawyer.  He said “no, I never needed one, I work these things out myself.”  My father was not in construction, he was in advertising and the legal climate has changed. However, according to the news we are in troubled times as we were during the Great Depression.  Luckily, New Jersey law makers have  passed legislation that promotes self-help.

Take Advantage of the Statute by Exercising your Rights

 The Prompt Payment Law (“PPL”) was passed in 2006 and is applicable to contracts executed after September 1, 2006.  See Shore Mechanical Contractors, Inc. v. Osborne Construction, 2008 WL 4107985.  It allows contractors to build their case for payment during the project.  The PPL requires Owners and Contractors to pay in a timely manner.  Under the PPL, if a certified payment is not timely paid interest and attorneys fees accrue.  Now I know I was writing about recovering money without the assistance of an attorney, but the loom of attorneys fees is always an ominous additional burden.

I have found that the best way to avoid litigation is to show your opposition that you have the law on your side.  This is the reason that building your case while the contract is ongoing is invaluable.  You have the right to know where your payment is and why you are not being paid.  The contractor should  no longer be subject to months of silence after the submission of a payment application or the payment application approval simply “not making it on last meeting’s agenda.”  The statute requires payment “unless the owner provides, before the end of the 20-day period, a written statement of the amount withheld and the reason for withholding payment.”  The subcontractor must be paid within 10 calendar days of receipt of each periodic payment.  Time is money, each week that an application for payment sits unanswered is another week of uncertainty for the business.  The statute requires the owner to establish a record of the reason for non payment.  This will promote quicker settlements of payment dispute and refinement of issues between the parties.

The contractor, on the other hand must exercise his rights.  If more than 20 days since the submission of your pencil copy has elapsed, question the party to whom you have made your submission; put your question in writing, this will require an answer in writing.  Since the law requires “a written statement of...the reason for withholding payment,” you should receive the same.  Upon receipt of the answer you will have an issue you can work on, upon resolution of the issue you should be paid.  If not, at least you will have a record; a position in writing, which you can later dispute.

The Prompt Payment Law is a tool for the contractor to use to protect himself.  Like any tool it will only work for you if you use it.  If the contractor keeps records and makes requests in writing, he is better equipped to battle for his due.  Keep meticulous records and let the other side know you have done so, you may be able to avoid going to court to recover the money that is due to you.  If you must go to court to recover payment that is due on a contract that was entered after September 1, 2006, it would certainly be nice to be able to collect interest, reasonable costs and attorneys fees as provided by the Law.

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These materials are intended to provide general information about the subject matter and are presented  with the understanding that neither these materials nor the authors have, nor intend to, render any legal or other professional service or opinions. Anyone dealing with a specific legal matter should research any and all matters described generally herein and should not act upon this information without seeking  professional counsel. Please do not send us confidential information until you speak with one of our attorneys and get authorization to send that information.