The New Jersey Legislature has recently enacted a new Act called the “Prompt Payment Act.” The Act entitles all contractors, subcontractors, sub-subcontractors and product suppliers to prompt payment on all public and private projects. By its terms, the Act is only applicable to contracts entered into after September 1, 2006.

The Act requires a project owner to pay a contractor not later than thirty (30) days from the date the contractor’s bill is received. The Act applies only when the bill has been “approved and certified.” However, the Act states that a bill will be deemed “approved and certified” if twenty (20) days after the owner receives it, the owner has not objected to the bill, in writing, and specified the amount objected to and the reasons for the objection. The Act has different procedures, however, for certain public entities that have approval mechanisms for payment of contractors on public projects. Subcontractors, sub-subcontractors, and suppliers are entitled to receive payment from contractors they are under contract with or supplied material to within ten (10) days of the contractor’s or subcontractor’s receipt of periodic payments from the owner, unless otherwise agreed to in writing.

The Act also provides for payment of interest on unpaid amounts at prime plus one (1%) percent in the event payment is not made within the time period provided by the Act. In addition, the Act allows a contractor, subcontractor and sub-subcontractor to suspend work upon seven (7) days written notice if; a) the unpaid party is not provided a statement of the amount withheld and the reason for the withholding, and b) the payor is not engaged in a good faith effort to resolve the reason for the withholding of payment.

The Act provides that a party who sues under the Act and wins is entitled to an award of statutory costs and attorneys fees for bringing the action.

If you have any questions about how the Prompt Payment Act may affect your contracts or work, please contact John Randy Sawyer, Esquire.