Monday, February 20, 2017

The NY Prompt Payment Act: Can it help you get paid?

There is probably not a day that goes by that I don’t hear someone tell me that something that [insert name of person that owes them money] did that is a violation of the Prompt Payment Act.  It’s really quite amazing how all-encompassing the Prompt Payment Act (“PPA”) has become over the years…at least in the minds of those in the NY construction industry.  The truth is that the PPA is an effective (and under-utilized) tool, but it’s not always applicable and it doesn’t, despite what your buddy told you, cover everything and require you to be paid within ten days no matter what.  Here’s what the PPA does do:

When does it apply?
It applies to “construction contracts.”  Before you jump up and down, read the definition in the PPA.  A construction contract may not be what you think it is.  Better yet, see what it is not:  a construction contract is not a contract for public works nor is it a contract for the construction of a one, two or three family home.  You can almost hear the collective gasps.  I’ll bet more than half of the people that talk about what their customer must do under the PPA don’t realize that it doesn’t even apply to them. 

If it does apply…
You can still bargain for whatever you want in your contract and your contract will control over the PPA terms with limited exceptions.  If your contract does not cover a particular issue, then the PPA will control if you are, in fact, operating under a “construction contract.”  The PPA requires approval or disapproval of invoices within twelve (12) days of the time that all necessary documentation has been submitted.  Disapproved invoices must be explained in writing.  If payments aren’t made as required under the PPA then it provides for interest at the rate of 1% per month and expedited arbitration.  There are detailed procedures for invoicing and processing invoices.  Everyone that is in accounts receivable or accounts payable should read the PPA and know what they are required to do. 

Void Provisions?

The PPA makes the following provisions void so, even if they are in the contract, they cannot be enforced:  1) any provision that requires you to apply the laws of a state other than NY or to litigate or arbitrate any dispute arising out of the contract outside of NY (unless it’s a contract with a material supplier); 2) any provision that prohibits suspending work for non-payment; 3) any provision that says expedited arbitration, as provided in the PPA, is unavailable; 4) any provision that establishes payment provisions that differ from those in the PPA.  

Tuesday, January 17, 2017

Quick Construction Contract Tips: Notice Provisions

Many in the construction industry are concerned about two things in the contract above all else:  how much will I get paid and when.  But while very important, those things only matter IF you will get paid.   An often overlooked provision is the notice provision of the contract.

Sometimes tucked away in terms and conditions, the notice provision can be crucial to getting paid.  More and more construction contracts will require written notice of claims within a certain number of days and submitted by a certain method (i.e. e-mail, facsimile, certified mail, etc.).  When it comes to payment, notice can be important in two areas.   First, if there is a change order for which you are seeking payment, the contract may require you to serve written notice of the conditions giving rise to the claims before you can request payment.  Second, if you are not paid, that gives rise to a claim for non-payment.  If the contract requires written notice of such a claim, and you do not present the written notice, it may be deemed a failure of a "condition precedent" and severely restrict or eliminate your ability to pursue the payment through Court.

Some Courts in New York will "strictly construe" notice provisions and not allow the claims for payment where the notice provision was not fully complied with.  So, the lesson to learn:   read the notice provision and negotiate it.   Make sure that the time period is reasonable.  24 hours notice may not be reasonable.   Likewise, 2 days notice may not be reasonable if the condition manifests on a Friday afternoon and the foreman doesn't report it to the office until Monday afternoon.  More than 2 days will have passed before the office is even aware of the condition.   Therefore, think notices through before signing the contract.  Make sure the period is reasonable and realistic and make sure field supervisors know the requirements so that they can immediately report to the office.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.   His practice concentrates on construction law including contract drafting and review.

Saturday, December 24, 2016

Contractor Waived Claims Not Expressly Set Forth in Notice

The First Department of the Appellate Division recently held that a contractor had waived certain claims in connection with a government contract because the contractor did not expressly set forth the claims in an extension of time request.  The decision notes:

The contract governing the construction project required any request for an extension of time filed by petitioner to include a statement, "in detail," that petitioner "waives all claims except for those delineated in the application, and the particulars of any claims which [petitioner] does not agree to waive.

 Apparently, the contractor did not sufficiently identify the claims it wished to preserve when it submitted an extension request.  The Contract Dispute Resolution Board (CDRB) determined that the contractor had, thus, waived the claims.  The Appellate Division agreed and rejected the contractor's argument that the parties prior course of conduct should support no such waiver.  The Court noted that such and argument (called estoppel) is generally unavailable against government agencies and the particular contract at issue here specifically mentioned that the conduct of the City and its agents could not create an estoppel situation.

The case is a good reminder to contractors to carefully read their contracts and be careful in sending out notices.   When sending out any contract notices it is a good idea to engage counsel to review the contract and the notice and make sure that any possible claims are properly preserved.  It is never too early to engage counsel.  A bit of review and consultation during the project could potentially save tens of thousands of dollars on later litigation.

The case was LAWS Const. Corp. v. CDRB.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.   His practice concentrates on construction law including contract drafting and review.

Saturday, December 17, 2016

Construction Change Orders: Minimize Risk and Improve Efficiency

Avoiding OSHA Citations for Power Operated Tools and Equipment

Okay, maybe its not possible to avoid an OSHA investigation.  Whether it is a targeted investigation or a random check, an OSHA investigation can lead to costly citations (click here for information about challenging OSHA citations).  But remember, OSHA is there to make sure the workplace is safe.  If you follow industry guidelines you are much more likely to avoid potentially costly violations while simultaneously increasing your workplace safety.

OSHA offers many helpful guides, including checklists, to stay in compliance and avoid potential citations.  Here is a checklist provided by OSHA for handling Power Operated Tools and Equipment: