If you are a general contractor or a subcontractor, you should be aware of the New Jersey Prompt Payment Act. In general, the purpose of this law is to encourage prompt payment to contractors for the materials and services they provide on a project by imposing potential penalties, including attorney’s fees, if payments that are currently due are not done in a timely and correct manner. One of the provisions of this law contains a fee transfer provision whereby the contractor may be entitled to the award of all attorneys’ fees incurred in claiming the payment due from a general contractor. or a subcontractor.
A recent case from the Appeal Division discussed what would constitute reasonable attorney fees and costs that can be awarded to a party to bring an action to recover the payment to which it is entitled under the Prompt. Payment Act. In that case, the Appeal Division explained that the Prompt Payment Act requires the award of reasonable fees and costs to the winning party in an action brought under the Act. Further, the court ruled that the New Jersey Supreme Court did not require proportionality between damages recovered in the action and legal fees and expenses awarded under the law. As such, although the plaintiff’s legal fees and expenses exceeded the amount she had recovered, she was nonetheless entitled to payment thereof. The court explained that the only reason the plaintiff incurred the legal costs was the defendant’s unreasonable refusal to pay the plaintiff in full for the work he had provided.
As such, it is evident that the Prompt Payment Act can be a powerful negotiating tool in construction disputes and, moreover, can bring complete relief to an aggrieved contractor. Therefore, as a general contractor or subcontractor, full consideration of this law and its provision on the transfer of fees should always be considered.
COPYRIGHT © 2021, STARK & STARKRevue nationale de droit, volume XI, number 278