Key Construction Law Terms

Arbitration Clause:  A provision in a construction contract which requires that any dispute arising out of the contract be submitted to binding arbitration rather than litigation to resolve the dispute. 

Demobilization Costs: The costs associated with transferring a contractor's manpower and resources from a construction site after completion of a construction contract.

Discharge Bond: A bond obtained to discharge a mechanic's lien. The discharge bond cause the mechanic's lien to be removed from the real property or public fund and to attach to the bond itself. A mechanic's lien discharge bond is must be in the amount of 110% of the lien amount.

General Contractor: The contractor that has a contract directly with the owner of the project. Usually, the general contractor is responsible for overseeing all trades involved on the construction project. A general contractor is also sometimes referred to as the prime contractor.

Final Lien Waiver: A document signed by a contractor, materialman or supplier which indicates that it has been paid in full for the entire project and that it waives the right to file a mechanic's lien against the project.

Lien Foreclosure: A lawsuit commenced by a lienor to enforce its mechanic's lien against the real property or the public fund. In a foreclosure against real property, the foreclosure action seeks to sell the property to satisfy the lien. In a foreclosure against a public fund, the foreclosure action seeks an order directing the public entity holding the fund to satisfy the mechanic's lien out of the public fund.

Materialman: A materialman usually has a contract with either a general/prime contractor, a subcontractor or a sub-subcontractor to solely provide materials for the construction project. Materialmen do not provide any labor on the project.

Mediation Clause:  A provision in a construction contract that requires that any dispute arising out of a construction contract be first submitted to mediation as a condition precedent to arbitration or litigation. 

Mobilization Costs: The costs associated with transferring a contractor's manpower and resources to a construction site for completion of a construction contract.

Partial Lien Waiver: A document signed by a contractor, materialman or supplier which indicates that it has been paid for a certain portion of its work and that it waives the right to file a mechanic's lien for that portion of the work.

Prime Contractor: The contractor that has a contract directly with the owner of the project. Usually, the prime contractor is responsible for overseeing all trades involved on the construction project. A prime contractor is also sometimes referred to as a general contractor.

Satisfaction of Lien: A document signed by a lienor and filed with the the county clerk (private project) or public entity (public project) indicating that a previously filed mechanic's lien has been satisfied and may now be discharged of record.

Section 38 Demand: A demand served pursuant to Section 38 of the Lien Law which requires the lienor to serve a verified itemized statement of its lien within five (5) days of receipt of the demand.

Section 59 Demand: A demand served pursuant to Section 59 of the Lien Law which requires the lienor to foreclose upon its lien within thirty (30) days or show cause why the mechanic's lien should not be discharged.

Section 76 Demand: A demand served pursuant to Section 76 of the Lien Law which requires the trustee of a lien law trust fund to either 1) provide a verified statement of the books and records of the trust, including an accounting of all funds received into the trust and all funds dispersed from the trust, or 2) allow the beneficiary of the trust to inspect the books and records of the lien law trustee.

Subcontractor: A subcontractor has a contract with the general/prime contractor on the construction project. The subcontractor is usually responsible for one or more limited trades on the construction project. A subcontractor provides labor and materials to the construction project. Subcontractors may file mechanic's lien on private or public projects.

Sub-subcontractor: A sub-subcontractor has a contract with a subcontractor on the project. The sub-subcontractor usually is responsible for one limited trade or even one portion of one limited trade on the construction project. A sub-subcontractor provides labor and materials, or sometimes just labor, to the construction project. Sub-subcontractors may file mechanic's liens on a private or public project.

Trust Fund: Under Article 3A of the Lien Law, anyone receiving money on a construction project is required to hold that money in trust for the benefit of the subcontractor and materialmen below him/her/it. The funds are only to be used for permissible trust purposes and all trust claims must be satisfied before the funds can be used for any other purposes.