STATE OF NEW YORK
________________________________________________________________________
2313
2011-2012 Regular Sessions
IN ASSEMBLY
January 18, 2011
___________
Introduced by M. of A. HEASTIE, ZEBROWSKI -- read once and referred to
the Committee 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:
1 Section 1. The general business law is amended by adding a new article
2 37-B to read as follows:
3 ARTICLE 37-B
4 TIMELY PAYMENTS AND INTEREST OWED TO CONTRACTORS
5 Section 806. Legislative intent.
6 807. Definitions.
7 808. Payments owed to contractors.
8 809. Determination of eligibility for payment of interest on
9 amounts owed to contractors.
10 § 806. Legislative intent. Firms and organizations that do business
11 within the state of New York expect and deserve to be paid in a prompt
12 and timely manner. Unjustified delays in paying vendors, construction
13 contractors, and providers of service may discourage such firms and
14 organizations from doing business within the state of New York and may
15 ultimately increase the costs to consumers of purchasing materials,
16 equipment, and supplies; undertaking construction and reconstruction
17 projects; and obtaining a wide variety of professional and other
18 specialized services including those that are provided to persons in
19 need. Consequently, this legislation sets standards for the payment of
20 bills incurred by consumers within specified periods of time and
21 requires interest payments in situations where contract payments do not
22 conform to these standards. Consistent with accepted business practices
23 and with sound principles of fiscal management, it is the intent of this
24 legislation to encourage consumers to make payments at least as expe-
25 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.
LBD06477-01-1
A. 2313 2
1 processing times whenever feasible, while at the same time ensuring that
2 the consumer receives the quality of goods and services to which it is
3 entitled to.
4 § 807. Definitions. As used in this article, the following terms shall
5 have the following meanings unless otherwise specified:
6 1. "Contract" means an enforceable agreement entered into by a prime
7 contractor and a consumer.
8 2. "Consumer" means an individual or individuals entering into a
9 contract with a prime contractor.
10 3. "Billing" means, in accordance with the terms and definitions of
11 the applicable contract, any periodic payment, final payment, written
12 approved change order or request for release of retainage.
13 4. "Prime contractor" means a person who contracts with a consumer to
14 improve real property.
15 5. "Subcontractor" means any person who has contracted to furnish
16 labor, materials or other services to a prime contractor in connection
17 with a contract for improvement of real property.
18 6. "Subsubcontractor" means any person who has contracted to furnish
19 labor, materials or other services to a subcontractor in connection with
20 a contract for improvement of real property.
21 7. "Materialmen" means any person who has contracted to furnish mate-
22 rials or other services to a prime contractor, subcontractor or subsub-
23 contractor for improvement of real property.
24 8. "Payment date" means the date on which a check for payment pursuant
25 to a contract is dated.
26 9. "Proper invoice" means a written request for a contract payment
27 that is submitted by a contractor setting forth the description, price,
28 and quantity of goods, property, or services delivered or rendered, in
29 such form and supported by such other substantiating documentation as
30 may reasonably be required.
31 10. "Receipt of an invoice" means (a) the date on which a proper
32 invoice is actually received by the consumer, or (b) the date on which
33 the consumer receives the purchased goods, property, or services covered
34 by the proper invoice, whichever is later.
35 11. "Required payment date" means the date by which a contract payment
36 must be made in order for the consumer not to become liable for interest
37 payments, pursuant to subdivision one of section eight hundred eight of
38 this article.
39 12. "Prime rate" means the basic rate on corporate loans published by
40 the board of governors of the federal reserve system.
41 § 808. Payments owed to contractors. 1. If a prime contractor has
42 performed in accordance with the provisions of a contract with the
43 consumer and the billing for the work has been approved and certified
44 by the consumer or the consumer's authorized approving agent, the
45 consumer shall pay the amount due to the prime contractor for each peri-
46 odic payment, final payment or retainage monies not more than thirty
47 calendar days after the billing date, which for periodic billing, shall
48 be the periodic billing date specified in the contract.
49 2. Each consumer shall have fifteen calendar days after receipt of an
50 invoice to notify the contractor of (a) defects in the delivered goods,
51 property, or services, (b) defects in the invoice, or (c) suspected
52 improprieties of any kind; and the existence of such defects or impro-
53 prieties shall prevent the commencement of the time period specified in
54 subdivision one of this section. When a consumer fails to notify a
55 contractor of such defects or suspected improprieties within fifteen
56 calendar days of receiving the invoice, the number of days allowed for
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1 payment of the corrected proper invoice will be reduced by the number of
2 days between the fifteenth day and the day that notification was trans-
3 mitted to the contractor. If the consumer, in such situations, fails to
4 provide reasonable grounds for its contention that a defect or impro-
5 priety exists, the required payment date shall be calculated from the
6 date of receipt of an invoice.
7 3. A prime contractor, subcontractor or subsubcontractor may, after
8 providing seven calendar days written notice to the party failing to
9 make the required payments, suspend performance of a construction
10 contract, without penalty for breach of contract, until the required
11 payment pursuant to this section is made; provided however, that the
12 prime contractor, subcontractor or subsubcontractor has not been paid as
13 required by this section, has not been provided with a written statement
14 by the consumer of the amount withheld and the reason for withholding,
15 and the consumer is not engaged in a good faith effort to resolve the
16 reason for withholding.
17 4. A proper invoice submitted by the contractor shall be required to
18 initiate any payment, except where the contract provides that the
19 contractor will be paid at predetermined intervals without having to
20 submit an invoice for each such scheduled payment, in which case the
21 consumer shall submit to the required payment date which shall be the
22 payment due date specified in accordance with the contract.
23 5. (a) The rights, remedies or protections provided by this section
24 for prime contractors, subcontractors and subsubcontractors shall be in
25 addition to other remedies provided pursuant to any other provision of
26 state law.
27 (b) No provision of this section shall be construed as restricting in
28 any way the rights or remedies provided by any other applicable state
29 law.
30 § 809. Determination of eligibility for payment of interest on amounts
31 owed to contractors. 1. If a payment due pursuant to the provisions of
32 section eight hundred eight of this article is not made in a timely
33 manner, the delinquent party shall be liable for the amount of money
34 owed under the contract, plus interest at a rate equal to prime rate
35 plus one percent. Interest on amounts due pursuant to this section shall
36 be paid to the prime contractor, subcontractor or subsubcontractor for
37 the period beginning on the day after the required payment date and
38 ending on the day on which the check for payment has been drawn.
39 2. Any consumer who is required to make a payment pursuant to a
40 contract and which does not make such contract payment by the required
41 payment date shall make an interest payment to the prime contractor in
42 accordance with this section on the amount of the contract payment which
43 is due, unless failure to make such contract payment is the result of a
44 lien, attachment, or other legal process against the money due said
45 prime contractor. A pro rata share of such interest shall be paid by the
46 prime contractor, subcontractor or subsubcontractor, as the case may be,
47 to subcontractors and materialmen in a proportion equal to the percent-
48 age of their pro rata share of the contract payment. Such pro rata
49 share of interest shall be due to such subcontractors and materialmen
50 only for those payments which are not paid to such subcontractors and
51 materialmen prior to the date upon which interest begins to accrue
52 between the consumer and the contractor. Such pro rata share of interest
53 shall be computed daily until such payments are made to the subcontrac-
54 tors and materialmen.
55 § 2. This act shall take effect immediately, and shall apply to
56 contracts entered into on or after such effective date.
