{"id":898760,"date":"2021-05-18T14:43:27","date_gmt":"2021-05-18T20:43:27","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=898760"},"modified":"2021-05-18T14:43:31","modified_gmt":"2021-05-18T20:43:31","slug":"prompt-payment-provision-mass","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/prompt-payment-provision-mass\/","title":{"rendered":"Time to \u201cPay\u201d Attention to Payment Provisions for Construction Contracts in Massachusetts"},"content":{"rendered":"\n

R. Thomas Dunn | Pierce Atwood<\/a><\/p>\n\n\n\n

I know what you are thinking . . . payment provisions have ALWAYS been key components of construction projects.\u00a0 Owners want to understand what they are paying for and that they are not over-paying.\u00a0 Contractors want prompt payment provisions<\/a> and limitations on an Owner\u2019s ability to withhold payment.\u00a0 Lower tier subcontractors and suppliers want clarity, information and remedies, other than what can be a cumbersome mechanic\u2019s lien process, to ensure that they will get paid in the event of a dispute.\u00a0 So, I absolutely agree, payment provisions are essential.\u00a0 If payment is not made or the payment applications are not provided per the terms of the contract, it can cause delays and additional costs for all project participants.<\/p>\n\n\n\n

A number of years ago, Massachusetts passed the Massachusetts Prompt Pay Act, G.L. c. 149, \u00a729E (the \u201cAct\u201d).  The purpose of the Act is to create some ground rules that are read into each private<\/strong> construction contract that is $3,000,000 or more<\/strong>.  It creates time periods by which payment applications must be allowed and, importantly for this post, provisions for the review, approval, and rejection of a payment application.  The Act requires certain formalities that may be a trap for the unwary such as:<\/p>\n\n\n\n

Certification that the rejection is made in good faith<\/p><\/blockquote>\n\n\n\n

Failure to timely approve a payment application also has consequences such as having the payment application be deemed approved<\/strong>.<\/p>\n\n\n\n

While there has been much discussion about the prompt payment and retainage law in Massachusetts since their enactment, there have been few cases applying the statutes.  In a recent Massachusetts Superior Court case, a court found that when a contract and the Act are at odds, the Act controls and supplements or trumps any contrary provisions within the contract. Tocci Building Corp. v. IRIV Partners, LLC<\/em>, C.A. No. 19-00405 (Mass. Super. Ct. Nov. 19, 2020).   So, for that reason, we strongly advise all owners, contractors, and subcontractors to revisit their standard form contracts, conduct training with their project management teams, and take other actions appropriate for your organizations to ensure compliance with the Act.  In this post, we summarize the Act and the Tocci<\/em> case.<\/p>\n\n\n\n

STATUTORY BACKGROUND<\/strong><\/p>\n\n\n\n

Subject to limited exceptions, the Act is applicable to all private construction projects \u201cfor which the person whose contract with the project owner has an original contract price of $3,000,000 or more.\u201d  Section 29E(a).  Further, the act sets out requirements that \u201cprovide reasonable time periods within which: (i) a person seeking payment under the contract shall submit written applications for periodic progress payments; (ii) the person receiving the application shall approve or reject the application . . . and (iii) the person approving the application shall pay the amount approved.\u201d Section 29E(c).  The Act also provides time periods that shall not be exceeded for each application for a periodic progress payment. Id. <\/em> Some of these are<\/p>\n\n\n\n