S T A T E O F N E W Y O R K
________________________________________________________________________
4326
2009-2010 Regular Sessions
I N A S S E M B L Y
February 3, 2009
___________
Introduced by M. of A. HEASTIE -- read once and referred to the Commit-
tee on Consumer Affairs and Protection
AN ACT to amend the general business law, in relation to requiring time-
ly payments and interest owed to contractors
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. The general business law is amended by adding a new article
37-B to read as follows:
ARTICLE 37-B
TIMELY PAYMENTS AND INTEREST OWED TO CONTRACTORS
SECTION 806. LEGISLATIVE INTENT.
807. DEFINITIONS.
808. PAYMENTS OWED TO CONTRACTORS.
809. DETERMINATION OF ELIGIBILITY FOR PAYMENT OF INTEREST ON
AMOUNTS OWED TO CONTRACTORS.
S 806. LEGISLATIVE INTENT. FIRMS AND ORGANIZATIONS THAT DO BUSINESS
WITHIN THE STATE OF NEW YORK EXPECT AND DESERVE TO BE PAID IN A PROMPT
AND TIMELY MANNER. UNJUSTIFIED DELAYS IN PAYING VENDORS, CONSTRUCTION
CONTRACTORS, AND PROVIDERS OF SERVICE MAY DISCOURAGE SUCH FIRMS AND
ORGANIZATIONS FROM DOING BUSINESS WITHIN THE STATE OF NEW YORK AND MAY
ULTIMATELY INCREASE THE COSTS TO CONSUMERS OF PURCHASING MATERIALS,
EQUIPMENT, AND SUPPLIES; UNDERTAKING CONSTRUCTION AND RECONSTRUCTION
PROJECTS; AND OBTAINING A WIDE VARIETY OF PROFESSIONAL AND OTHER
SPECIALIZED SERVICES INCLUDING THOSE THAT ARE PROVIDED TO PERSONS IN
NEED. CONSEQUENTLY, THIS LEGISLATION SETS STANDARDS FOR THE PAYMENT OF
BILLS INCURRED BY CONSUMERS WITHIN SPECIFIED PERIODS OF TIME AND
REQUIRES INTEREST PAYMENTS IN SITUATIONS WHERE CONTRACT PAYMENTS DO NOT
CONFORM TO THESE STANDARDS. CONSISTENT WITH ACCEPTED BUSINESS PRACTICES
AND WITH SOUND PRINCIPLES OF FISCAL MANAGEMENT, IT IS THE INTENT OF THIS
LEGISLATION TO ENCOURAGE CONSUMERS TO MAKE PAYMENTS AT LEAST AS EXPE-
DITIOUSLY AS THEY CURRENTLY DO AND FURTHER TO REDUCE EXISTING PAYMENT
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06614-01-9
A. 4326 2
PROCESSING TIMES WHENEVER FEASIBLE, WHILE AT THE SAME TIME ENSURING THAT
THE CONSUMER RECEIVES THE QUALITY OF GOODS AND SERVICES TO WHICH IT IS
ENTITLED TO.
S 807. DEFINITIONS. AS USED IN THIS ARTICLE, THE FOLLOWING TERMS SHALL
HAVE THE FOLLOWING MEANINGS UNLESS OTHERWISE SPECIFIED:
1. "CONTRACT" MEANS AN ENFORCEABLE AGREEMENT ENTERED INTO BY A PRIME
CONTRACTOR AND A CONSUMER.
2. "CONSUMER" MEANS AN INDIVIDUAL OR INDIVIDUALS ENTERING INTO A
CONTRACT WITH A PRIME CONTRACTOR.
3. "BILLING" MEANS, IN ACCORDANCE WITH THE TERMS AND DEFINITIONS OF
THE APPLICABLE CONTRACT, ANY PERIODIC PAYMENT, FINAL PAYMENT, WRITTEN
APPROVED CHANGE ORDER OR REQUEST FOR RELEASE OF RETAINAGE.
4. "PRIME CONTRACTOR" MEANS A PERSON WHO CONTRACTS WITH A CONSUMER TO
IMPROVE REAL PROPERTY.
5. "SUBCONTRACTOR" MEANS ANY PERSON WHO HAS CONTRACTED TO FURNISH
LABOR, MATERIALS OR OTHER SERVICES TO A PRIME CONTRACTOR IN CONNECTION
WITH A CONTRACT FOR IMPROVEMENT OF REAL PROPERTY.
6. "SUBSUBCONTRACTOR" MEANS ANY PERSON WHO HAS CONTRACTED TO FURNISH
LABOR, MATERIALS OR OTHER SERVICES TO A SUBCONTRACTOR IN CONNECTION WITH
A CONTRACT FOR IMPROVEMENT OF REAL PROPERTY.
7. "MATERIALMEN" MEANS ANY PERSON WHO HAS CONTRACTED TO FURNISH MATE-
RIALS OR OTHER SERVICES TO A PRIME CONTRACTOR, SUBCONTRACTOR OR SUBSUB-
CONTRACTOR FOR IMPROVEMENT OF REAL PROPERTY.
8. "PAYMENT DATE" MEANS THE DATE ON WHICH A CHECK FOR PAYMENT PURSUANT
TO A CONTRACT IS DATED.
9. "PROPER INVOICE" MEANS A WRITTEN REQUEST FOR A CONTRACT PAYMENT
THAT IS SUBMITTED BY A CONTRACTOR SETTING FORTH THE DESCRIPTION, PRICE,
AND QUANTITY OF GOODS, PROPERTY, OR SERVICES DELIVERED OR RENDERED, IN
SUCH FORM AND SUPPORTED BY SUCH OTHER SUBSTANTIATING DOCUMENTATION AS
MAY REASONABLY BE REQUIRED.
10. "RECEIPT OF AN INVOICE" MEANS (A) THE DATE ON WHICH A PROPER
INVOICE IS ACTUALLY RECEIVED BY THE CONSUMER, OR (B) THE DATE ON WHICH
THE CONSUMER RECEIVES THE PURCHASED GOODS, PROPERTY, OR SERVICES COVERED
BY THE PROPER INVOICE, WHICHEVER IS LATER.
11. "REQUIRED PAYMENT DATE" MEANS THE DATE BY WHICH A CONTRACT PAYMENT
MUST BE MADE IN ORDER FOR THE CONSUMER NOT TO BECOME LIABLE FOR INTEREST
PAYMENTS, PURSUANT TO SUBDIVISION ONE OF SECTION EIGHT HUNDRED EIGHT OF
THIS ARTICLE.
12. "PRIME RATE" MEANS THE BASIC RATE ON CORPORATE LOANS PUBLISHED BY
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.
S 808. PAYMENTS OWED TO CONTRACTORS. 1. IF A PRIME CONTRACTOR HAS
PERFORMED IN ACCORDANCE WITH THE PROVISIONS OF A CONTRACT WITH THE
CONSUMER AND THE BILLING FOR THE WORK HAS BEEN APPROVED AND CERTIFIED
BY THE CONSUMER OR THE CONSUMER'S AUTHORIZED APPROVING AGENT, THE
CONSUMER SHALL PAY THE AMOUNT DUE TO THE PRIME CONTRACTOR FOR EACH PERI-
ODIC PAYMENT, FINAL PAYMENT OR RETAINAGE MONIES NOT MORE THAN THIRTY
CALENDAR DAYS AFTER THE BILLING DATE, WHICH FOR PERIODIC BILLING, SHALL
BE THE PERIODIC BILLING DATE SPECIFIED IN THE CONTRACT.
2. EACH CONSUMER SHALL HAVE FIFTEEN CALENDAR DAYS AFTER RECEIPT OF AN
INVOICE TO NOTIFY THE CONTRACTOR OF (A) DEFECTS IN THE DELIVERED GOODS,
PROPERTY, OR SERVICES, (B) DEFECTS IN THE INVOICE, OR (C) SUSPECTED
IMPROPRIETIES OF ANY KIND; AND THE EXISTENCE OF SUCH DEFECTS OR IMPRO-
PRIETIES SHALL PREVENT THE COMMENCEMENT OF THE TIME PERIOD SPECIFIED IN
SUBDIVISION ONE OF THIS SECTION. WHEN A CONSUMER FAILS TO NOTIFY A
CONTRACTOR OF SUCH DEFECTS OR SUSPECTED IMPROPRIETIES WITHIN FIFTEEN
CALENDAR DAYS OF RECEIVING THE INVOICE, THE NUMBER OF DAYS ALLOWED FOR
A. 4326 3
PAYMENT OF THE CORRECTED PROPER INVOICE WILL BE REDUCED BY THE NUMBER OF
DAYS BETWEEN THE FIFTEENTH DAY AND THE DAY THAT NOTIFICATION WAS TRANS-
MITTED TO THE CONTRACTOR. IF THE CONSUMER, IN SUCH SITUATIONS, FAILS TO
PROVIDE REASONABLE GROUNDS FOR ITS CONTENTION THAT A DEFECT OR IMPRO-
PRIETY EXISTS, THE REQUIRED PAYMENT DATE SHALL BE CALCULATED FROM THE
DATE OF RECEIPT OF AN INVOICE.
3. A PRIME CONTRACTOR, SUBCONTRACTOR OR SUBSUBCONTRACTOR MAY, AFTER
PROVIDING SEVEN CALENDAR DAYS WRITTEN NOTICE TO THE PARTY FAILING TO
MAKE THE REQUIRED PAYMENTS, SUSPEND PERFORMANCE OF A CONSTRUCTION
CONTRACT, WITHOUT PENALTY FOR BREACH OF CONTRACT, UNTIL THE REQUIRED
PAYMENT PURSUANT TO THIS SECTION IS MADE; PROVIDED HOWEVER, THAT THE
PRIME CONTRACTOR, SUBCONTRACTOR OR SUBSUBCONTRACTOR HAS NOT BEEN PAID AS
REQUIRED BY THIS SECTION, HAS NOT BEEN PROVIDED WITH A WRITTEN STATEMENT
BY THE CONSUMER OF THE AMOUNT WITHHELD AND THE REASON FOR WITHHOLDING,
AND THE CONSUMER IS NOT ENGAGED IN A GOOD FAITH EFFORT TO RESOLVE THE
REASON FOR WITHHOLDING.
4. A PROPER INVOICE SUBMITTED BY THE CONTRACTOR SHALL BE REQUIRED TO
INITIATE ANY PAYMENT, EXCEPT WHERE THE CONTRACT PROVIDES THAT THE
CONTRACTOR WILL BE PAID AT PREDETERMINED INTERVALS WITHOUT HAVING TO
SUBMIT AN INVOICE FOR EACH SUCH SCHEDULED PAYMENT, IN WHICH CASE THE
CONSUMER SHALL SUBMIT TO THE REQUIRED PAYMENT DATE WHICH SHALL BE THE
PAYMENT DUE DATE SPECIFIED IN ACCORDANCE WITH THE CONTRACT.
5. (A) THE RIGHTS, REMEDIES OR PROTECTIONS PROVIDED BY THIS SECTION
FOR PRIME CONTRACTORS, SUBCONTRACTORS AND SUBSUBCONTRACTORS SHALL BE IN
ADDITION TO OTHER REMEDIES PROVIDED PURSUANT TO ANY OTHER PROVISION OF
STATE LAW.
(B) NO PROVISION OF THIS SECTION SHALL BE CONSTRUED AS RESTRICTING IN
ANY WAY THE RIGHTS OR REMEDIES PROVIDED BY ANY OTHER APPLICABLE STATE
LAW.
S 809. DETERMINATION OF ELIGIBILITY FOR PAYMENT OF INTEREST ON AMOUNTS
OWED TO CONTRACTORS. 1. IF A PAYMENT DUE PURSUANT TO THE PROVISIONS OF
SECTION EIGHT HUNDRED EIGHT OF THIS ARTICLE IS NOT MADE IN A TIMELY
MANNER, THE DELINQUENT PARTY SHALL BE LIABLE FOR THE AMOUNT OF MONEY
OWED UNDER THE CONTRACT, PLUS INTEREST AT A RATE EQUAL TO PRIME RATE
PLUS ONE PERCENT. INTEREST ON AMOUNTS DUE PURSUANT TO THIS SECTION SHALL
BE PAID TO THE PRIME CONTRACTOR, SUBCONTRACTOR OR SUBSUBCONTRACTOR FOR
THE PERIOD BEGINNING ON THE DAY AFTER THE REQUIRED PAYMENT DATE AND
ENDING ON THE DAY ON WHICH THE CHECK FOR PAYMENT HAS BEEN DRAWN.
2. ANY CONSUMER WHO IS REQUIRED TO MAKE A PAYMENT PURSUANT TO A
CONTRACT AND WHICH DOES NOT MAKE SUCH CONTRACT PAYMENT BY THE REQUIRED
PAYMENT DATE SHALL MAKE AN INTEREST PAYMENT TO THE PRIME CONTRACTOR IN
ACCORDANCE WITH THIS SECTION ON THE AMOUNT OF THE CONTRACT PAYMENT WHICH
IS DUE, UNLESS FAILURE TO MAKE SUCH CONTRACT PAYMENT IS THE RESULT OF A
LIEN, ATTACHMENT, OR OTHER LEGAL PROCESS AGAINST THE MONEY DUE SAID
PRIME CONTRACTOR. A PRO RATA SHARE OF SUCH INTEREST SHALL BE PAID BY THE
PRIME CONTRACTOR, SUBCONTRACTOR OR SUBSUBCONTRACTOR, AS THE CASE MAY BE,
TO SUBCONTRACTORS AND MATERIALMEN IN A PROPORTION EQUAL TO THE PERCENT-
AGE OF THEIR PRO RATA SHARE OF THE CONTRACT PAYMENT. SUCH PRO RATA
SHARE OF INTEREST SHALL BE DUE TO SUCH SUBCONTRACTORS AND MATERIALMEN
ONLY FOR THOSE PAYMENTS WHICH ARE NOT PAID TO SUCH SUBCONTRACTORS AND
MATERIALMEN PRIOR TO THE DATE UPON WHICH INTEREST BEGINS TO ACCRUE
BETWEEN THE CONSUMER AND THE CONTRACTOR. SUCH PRO RATA SHARE OF INTEREST
SHALL BE COMPUTED DAILY UNTIL SUCH PAYMENTS ARE MADE TO THE SUBCONTRAC-
TORS AND MATERIALMEN.
S 2. This act shall take effect immediately, and shall apply to
contracts entered into on or after such effective date.