A Guide to Contractor Claims Under New Jersey’s Prompt Payment Act
In 2006, New Jersey enacted the “Prompt Payment Act,” codified at N.J.S.A. 2A:30A-1, et seq. (the “PPA”). The PPA establishes timelines for payment of invoices or requisitions submitted by both private and public entities for a wide variety of construction-related contractors and vendors. The PPA applies to construction contracts entered into by any local governmental units (e.g. municipalities, school boards, counties, fire districts, etc.).
The primary purpose of the PPA is to ensure that contractors submitting bills for completed work are paid on a timely, established schedule, and if a contractor is not so paid through no failure of its own or due to circumstances outside of its control, the PPA allows contractors to receive interest on the outstanding balance due and, if litigation becomes necessary to enforce the provisions of the PPA, for the contractor to receive its costs and counsel fees associated therewith.
The PPA applies to contracts for above and below ground “improvements” to real property and structures.
The law defines the term “structure” to mean any part of a building and other improvements to real property. The law defines the term “improve” to mean the following:
This is an expansive definition and includes all improvements to real property.
Real property is defined as “real estate” – which includes publicly owned property – including traditional infrastructure such as roads, bridges, underground utilities, rights-of-way, and easements.
With respect to local governmental units, the PPA covers contracts with general or “prime contractors.”
While this term may have specific meaning for certain kinds of construction contracts under the Local Public and Public School Contracts Laws, for Prompt Payment purposes, it means any contractor that has contracted directly with a local unit for construction of improvements. The PPA provides for separate identification of “prime” contractors from any subcontractors working for the prime contractor. Subcontractors also have their own rights to timely payment under the PPA. The PPA utilizes the terms “prime contractor” and “contractor” interchangeably within its provisions.