General Business Law Section 756 (and the sections that follow it), commonly known as the Prompt Payment Act, establish requirements for how soon a construction contractor or subcontractor must be paid and allow expedited arbitration in the event that prompt payment is not made for qualifying projects.
Not all projects however fall under the requirements of the PPA, and the act specifically limits its application to non-public projects, having specific square footage and residential unit limitations, and does not apply to reconstruction, alteration, demolition or relocation of an existing structure.
In Donninger Construction, Inc. v. C.W. Brown, Inc., a subcontractor sued a general contractor for amounts which were claimed to be due under a construction contract. The subcontractor claimed that the contractor’s failure to issue a written disapproval of the subcontractor’s invoices, as required by the Prompt Payment Act, should bar the contractor from raising any defense in the lawsuit.
Reviewing the available remedies in the Prompt Payment Act, which include the imposition of interest and referral to arbitration, the court observed that “nothing in General Business Law § 756–b provides that a contractor’s failure to timely disapprove or make payment on an invoice prevents the contractor from contesting, acts as a waiver of a contractor’s ability to contest, or constitutes an admission that the contractor owes the invoiced sum.”
It allowed the contractor’s defenses and deducted for, among other things, back charges, incorrect invoicing, and improper performance of certain contract work, reducing the subcontractor’s damages from $216,000.00 to $18,479.00.
 113 A.D.3d 724, 979 N.Y.S.2d 133 (2nd Dep’t 2014)
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John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.
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