In this blog we will explore the scope of permissible back charges that an upper tier contractor can levy against a lower tier contractor pursuant to a subcontract. The basic tenement of contract law is that the non-breaching party is entitled to be put into the position as if the contract had been properly performed by all parties. In other words, the damages are limited to what the parties would have received had the contract been fully and properly performed.
When a project involves the construction of public works, or other improvements to a municipal, county, or a state property, a payment bond is typically posted by the general contractor for the project. This is required as lien claims are typically disallowed whenever project involves a state, county or a municipal property.
In State, County, or Municipal projects, payment bonds are typically required of the general contractor, as the commercial Construction Lien Law is inapplicable to these projects. Copies of the payment bond are always provided to the relevant government agency, as well as to all direct subcontractors or suppliers with whom the general contractor has directly contracted.
In virtually every industry, contracts are the instruments which govern the relationship between two entities that wish to conduct business. As such, it is helpful to know the basics as to what constitutes a binding contract to provide materials or services.
It would be unusual for a large to medium scale construction project to be completed without the general contractor experiencing issues with at least some of its subcontractors or suppliers.
Under such circumstances, it is typical for back charges to be assessed by the general contractor against the subcontractor or supplier who failed to perform properly pursuant to the terms of their contract. If the possibility of litigation looms in the future concerning such issues, or even if it may not, it is suggested that the general contractor carefully document any potential back charges against the subcontractor or vendor.
If you are a contractor or subcontractor in New Jersey who is involved in the construction or renovation of residential structures, you should be aware of the requirements for filing a construction lien on a residence.
This process is markedly different from the filing of a construction lien with regard to a commercial property. The process to file a residential construction lien is outlined within N.J.S.A. 2A:44A-21.
In a commercial construction setting, a construction lien only has to be filed with the county clerk within 90 days of the last date the contractor or vendor provided the materials and services. On the other hand, the process for filing a lien on a residential property is much more involved.
In general, a contractor or supplier is entitled to file a lien against a commercial property if they have performed work or provided materials pursuant to a written contract with the owner. These lien claims must be filed within 90 days of the last date of providing materials or services for the project.
On the other hand, if a contractor or supplier is providing materials or services for a tenant of a commercial property, the rules are different. The differences as to what the lien may attach to are discussed in detail below.
Although it is typical for AIA form contracts to contain arbitration clauses, as a contractor you should consider whether you should have an arbitration clause in your construction agreement. As discussed below, there are numerous factors to consider in determining whether mandatory arbitration is the preferred dispute resolution mechanism, or whether the state court system is preferred. Although arbitration may have some advantages, there are also disadvantages which must be considered rather than simply adopting the AIA form. Continue Reading Should I Have an Arbitration Clause in My Construction Contract?
The purpose of this blog is to provide a general overview of the basics of filing commercial construction liens. It must be noted, however, that the procedure for filing a construction lien on a residential project is an entirely different process. Continue Reading The Basics of Commercial Construction Liens
While many contractors may not be aware of the existence of the New Jersey Prompt Payment Act, its application to construction litigation where payment is sought under either a general-contract or sub-contract is important to the industry. Continue Reading The New Jersey Prompt Payment Act