Saturday, September 28, 2013

Quick Construction Contract Tips: Sometimes its OK to Suspend Work for Non-Payment (even if your contract says its not...)

One of the most common responses to non-payment under a construction contrat is almost human nature:  don't pay me and I'll stop working.  But can you?  Some contracts, if not many, say that a contractor may not suspend work even if he or she has not been paid.  Luckily for contractors in New York, the legislature has given them protection against these clauses.  Specifically, Section 757 of the General Business Law says some contract clauses are void, including:

   2. A provision, covenant, clause or understanding in, collateral to or affecting  a  construction contract stating that a party to the contract cannot suspend performance under the contract if another  party  to  the contract fails to make prompt payments under the contract.

Now this doesn't mean that you can simply walk off the job the first day a payment is "late."  There are two important things to remember when attempting to use Section 757:  First, we have to determine whether another party has failed to make "prompt payment."  Just what is "prompt payment" in a construction contract?  You can look two places: the contract itself and the rest of the Prompt Payment Act in G.B.L. Article 35E.  Second, Section 757 of the GBL only voids the provision prohibiting suspension in the event of non-payment, it does not say that the unpaid contractor may abandon the job.  So while work may be suspended, the contractor would have to return upon cure of the failure to make "prompt payment."  
As always, make sure you read, and understand your contract before signing it and before taking a drastic action like suspending work.  
Vincent T. Pallaci is the managing partner of the New York law firm of Kushnick | Pallaci PLLC where his practice concentrates on construction law.  With offices in the New York City metropolitan area and Buffalo, KP serves the construction industry across the State of New York.  

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