Delaware recently revised its payment act, which is now known as the Building Construction Procedures Act (the “Act”) . The Act applies to all services provided on construction projects.
Need to Revise Standard Form Contracts. Of note, the Act mandates that all construction contracts must be governed by Delaware law and all litigation, arbitration, mediation or other dispute resolution procedures must take place in Delaware. For Pennsylvania GCs working in Delaware, if your subcontracts state that Pennsylvania law will govern the subcontract or that any litigation, arbitration, mediation or other dispute resolution procedures will take place in Pennsylvania, the revised Act renders such provisions void and unenforceable. Thus, we recommend that Pennsylvania GCs working in Delaware revise their standard form subcontracts.
Significant Penalties. Be warned, that the revised Act really has some teeth, as it includes significant penalties and attorneys’ fees against parties who wrongfully withhold money in bad faith. Specifically, if it is determined in arbitration or litigation that the owner, contractor, or subcontractor wrongfully withheld money in bad faith, the Court or arbitrator may award the amount determined to be have been wrongfully withheld, plus an amount equal to the amount wrongfully withheld as additional damages. The substantially prevailing party may also be awarded its reasonable attorneys’ fees, arbitration costs and expenses, and, if applicable, expenses for expert witnesses.
Disputed Invoices. Additionally, the Act increases the time for an owner or contractor to dispute an amount stated in an invoice from seven days to fifteen days. However, if written notice is not given within fifteen days of receipt of the disputed invoice, the invoice shall be deemed to be accepted and payment shall be made by the owner or contractor. Nonetheless, despite payment of an invoice, the owner or contractor may still challenge the quality of the work covered by any undisputed invoice.
The attorneys are Harmon & Davies are available to assist you with revising your standard form subcontracts to comply with the revised Act.
This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.
