Luke LaRocca, Benjamin R. Grau, H. Bruce Shreves, Douglass F. Wynne and Denise C. Puente | Simon Peragine Smith & Redfearn
Contracts
Construction contracts
What standard contract forms are used for construction and design? Must the language of the contract be the local language? Are there restrictions on choice of law and the venue for dispute resolution?
The construction and design industry in Louisiana frequently utilises standard contract forms developed by well-established organisations, including:
- American Institute of Architects (AIA) Contracts: In the state of Louisiana, the construction and design industry commonly utilise standard contract forms published by the AIA for a wide range of projects, such as AIA A101 Standard Form of Agreement between Owner and Contractor; A201 General Conditions of the Contract for Construction; and AIA B101 Standard Form of Agreement between Owner and Architect.
- ConsensusDocs: These are another set of widely recognised contract forms, such as ConsensusDocs 200 (Standard Agreement and General Conditions Between Owner and Constructor) and ConsensusDocs 240 (Agreement Between Owner and Design Professional).
- EJCDC Contracts (Engineers Joint Contract Documents Committee): EJCDC contracts are frequently used for engineering projects in Louisiana, particularly in public works and infrastructure projects. These documents are recognised as industry-standard contracts for engineers, architects, and public project owners.
While these forms are not mandated by Louisiana law, they are widely accepted in practice due to their industry recognition.
Contract language
Louisiana law does not specifically mandate the language of construction and design contracts. Parties are free to draft contracts in any language, but it is recommended to use English to avoid complications in enforcement, especially in court proceedings. If a contract is written in another language, it is advisable to provide an English translation for legal and administrative purposes.
Restrictions on choice of law and venue for dispute resolution
In Louisiana, Louisiana Revised Statutes section 9:2779 governs the enforceability of choice of law and venue provisions in construction contracts. This statute imposes specific restrictions on parties who seek to apply foreign laws or require dispute resolution in a different jurisdiction.
- Choice of law: According to Louisiana Revised Statutes section 9:2779(A), any provision in a construction contract related to a project physically located in Louisiana that mandates the application of laws from another state or jurisdiction is considered void and unenforceable when one of the parties to the contract is domiciled in Louisiana. In that event, Louisiana law must govern such contracts, ensuring that the legal framework for the project aligns with the state’s regulations.
- Venue for dispute resolution: Louisiana Revised Statutes section 9:2779(B) also invalidates any contractual provision that requires disputes related to construction projects in Louisiana to be resolved outside the state when one of the parties to the contract is domiciled in Louisiana. Whether through litigation, arbitration, or other forms of dispute resolution, any attempts to mandate that these occur outside of Louisiana will be considered unenforceable. All dispute resolution processes must take place within the state when one of the parties to the contract is a Louisiana domiciliary.
Payment methods
How are contractors, subcontractors, vendors and workers typically paid and is there a standard frequency for payments?
In Louisiana, the payment of construction contractors, subcontractors, vendors, and workers is governed by a combination of contract terms, industry practices, and legal requirements outlined in the Louisiana Private Works Act, Louisiana Public Works Act and other state labour laws. While payment terms are typically set by the contract, certain legal protections exist to ensure timely payments for work performed, materials supplied, and services rendered. Below are the typical payment practices and legal guidelines:
Contractors
- Payment terms: Contractors typically receive progress payments based on milestones, or the percentage of work completed. These payments are usually made monthly and specified in the contract.
- Prompt payment law: According to Louisiana Revised Statute 38:2191, all public entities must promptly pay all obligations, including change orders, arising out of public contracts when the obligations become due and payable under the contract. For progressive stage payments, those must be made within forty-five days of receipt by the public entity of a certified payment request. Delay in payment can result in an award of interest and attorney fees if monies are withheld without reasonable cause.
- Mechanic’s lien: If a contractor is not paid, they can file a mechanic’s lien under the Louisiana Private Works Act (Louisiana Revised Statutes section 9:4801), giving them a legal claim to the property until payment is received.
Subcontractors
- Payment terms: Subcontractors are often paid after the general contractor receives payment from the owner. Payments are usually made monthly based on progress billing and milestones.
- Prompt payment law: Subcontractors must be paid within 14 days of the contractor receiving payment from the owner, unless otherwise specified in writing (Louisiana Revised Statutes section 9:2784). Delay in payment can result in an award of interest and attorney fees if monies are withheld without reasonable cause.
- Mechanic’s lien: Subcontractors also have lien rights under the Louisiana Private Works Act and Louisiana Public Works Act. If they are not paid, they can file a lien to secure payment and implicate Contractor Payment Bonds, provided they meet notice and filing deadlines.
Vendors and suppliers
- Payment terms: Vendors and suppliers are typically paid based on the terms in their supply contracts, which can range from 30 to 60 days after delivery of materials.
- Prompt payment law: Like subcontractors, vendors and suppliers are entitled to timely payment under Louisiana Revised Statutes section 9:2784. If the general contractor or subcontractor receives payment for materials, they must pay the vendor within 14 days.
- Mechanic’s lien: Certain Vendors and suppliers also have lien rights under the Louisiana Private and Public Works Act. They can file a lien or Statement of Claim and Privilege against the property and/or to implicate the Contractor supplied Payment Bond if they are not paid for materials supplied to the project.
Workers
- Payment terms: Workers are paid on a weekly or bi-weekly basis, depending on the employment agreement. These payments typically include wages earned for the period of work.
- Louisiana wage payment law: Under Louisiana Revised Statutes section 23:631, employers must pay workers regularly, and if an employee is terminated or resigns, they must be paid all earned wages by the next regular payday or within 15 days. Failure to do so can result in penalties, including double the wages owed under Louisiana Revised Statutes section 23:632.
- No Lien Rights: Unlike contractors, subcontractors, and suppliers, workers (employees) do not have mechanic’s lien rights under the Louisiana Private Works Act but are protected under wage and labour laws.
PPP and PFI
Is there a formal statutory and regulatory framework for PPP and PFI contracts?
Louisiana has a formal statutory and regulatory framework for Public-Private Partnerships (PPP) and Private Finance Initiatives (PFI), particularly focused on infrastructure projects such as transportation, water, and other public utilities.
Public-Private Partnerships (PPP)
The main statute governing PPP contracts in Louisiana is Louisiana Revised Statutes section 48:250.4 et seq., under the Louisiana Transportation Authority (LTA) and Department of Transportation and Development (DOTD). These laws provide the framework for public-private partnerships, specifically allowing the state to partner with private entities for the development, financing, construction, and operation of public infrastructure projects.
Key provisions include:
- Louisiana Revised Statutes section 48:250.4 (Public-Private Partnership authority): This statute authorises the Louisiana Department of Transportation and Development (LADOTD) to enter into PPP contracts for transportation infrastructure projects. It allows for a range of activities, such as the construction, operation, and maintenance of highways, toll roads, bridges, and other infrastructure.
- Selection process: Generally, the statute authorizing the PPP references the relevant authority for the selection process. For example, Louisiana Revised Statutes section 48:250.4 requires that the LADOTD comply with the applicable sections of Louisiana Revised Statutes sections 48:2084 through 2084.15 which speak to the proposal and selection process.
- Financing and revenue sharing: PPP agreements often include provisions for financing infrastructure projects through private capital. In exchange, the private partner may be entitled to collect tolls, fees, or other revenue for a defined period. The public authority retains oversight of the project to ensure compliance with state laws and public interest goals.
- Long-term agreements: PPP contracts can be long-term agreements where the private entity assumes responsibility for financing, construction, and sometimes maintenance or operation of public infrastructure. The state retains ownership of the underlying public asset.
Private Finance Initiatives (PFI)
Louisiana does not have a specific statute that explicitly governs Private Finance Initiatives (PFI) in the same way as PPPs, but PFI projects often fall under the broader PPP framework. PFI contracts typically involve private financing for public infrastructure, where the private sector designs, builds, finances, and operates infrastructure projects. PFI structures can be used under the same statutory framework that governs PPPs.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.