Does Montana's Prompt Pay Act override this construction contract's payment, retainage, or no-suspension terms?
Yes for some of those terms and no for others, and the line is not where it looks. For a written construction contract to build or improve real property in Montana the Act supplies DEFAULT timelines, two of which the contract may lengthen, and it voids a short list of clauses outright. Under § 28-2-2103(1)(b) a contractor's payment request is DEEMED approved 21 days after receipt unless the owner timely disapproves specific items in writing, and under (1)(f) an approved amount must be paid within 7 days of approval. Both of those subsections open “Except as provided in 28-2-2115”, and § 28-2-2115 is where the escape lives: an owner “may change the number of days to approve a contractor's payment request to later than 21 days”, and “may make payments later than 7 days after the date that the contractor's request for payment is approved”, in each case only if the contract “in a clear and conspicuous manner specifically provides” for the longer period AND a notice in substantially the form the section prints appears in clear and conspicuous type in the Information for Bidders section of the construction documents. So the 21 and the 7 are what the contract says if the contract is silent, not a floor. What the Act does NOT let the contract touch: a contractor must pay its subcontractor the full amount due within 7 days of receiving payment from the owner (§ 28-2-2103(2)), and no alternative-billing notice reaches that duty. Retainage is capped: “The maximum retainage applied to construction contracts subject to the provisions of this part may not exceed 5%” (§ 28-2-2110(1)), and a general contractor cannot withhold more from a subcontractor than the owner withheld from the general contractor. A contractor or subcontractor who is not paid may SUSPEND performance, and a contract clause saying otherwise is void: § 28-2-2116(2) makes it “against the public policy of this state” and “void and unenforceable” for a construction-contract provision to state “that a party to the contract may not suspend performance under the contract or terminate the contract if another party to the contract fails to make prompt payments under the contract as provided in 28-2-2103.” Two money consequences sit beside the timelines. A payment “delayed by more than 30 days from the date the payment is required by the contract to be made” carries interest at 1 1/2% a month on the unpaid balance (§ 28-2-2104(1)), although “[a]cceptance of the final payment releases any claim for interest on the payment” (§ 28-2-2104(3)), and the loser pays: in an action to enforce an obligation imposed by the Part, “the prevailing party is entitled to reasonable attorney fees and costs, both for trial and appeal” (§ 28-2-2105). Jem Contracting, Inc. v. Morrison-Maierle, Inc. invoked the no-suspension rule directly: the contractor “asserts this provision is void under § 28-2-2116(2), MCA, which provides” the no-suspension-voiding text quoted above, in a dispute over whether a contract clause barred the contractor from stopping work pending approval of a change order. JEM lost on other ground: “It is undisputed that JEM failed to follow the specific notification procedure in the Contract for differing subsurface conditions that was required for payment,” and the judgment against it was affirmed, so the case shows the section being argued rather than a clause being struck down under it.
The trap
Two separate void-clause rules live in this Part and are easy to conflate. § 28-2-2116(1) voids any Montana-construction-contract clause that picks ANOTHER STATE's law or requires dispute resolution to happen outside Montana, so a choice-of-law or venue clause routing a Montana construction dispute to another state is unenforceable regardless of what the parties agreed (the general, non-construction rule is different). § 28-2-2116(2) is the separate no-suspension voiding rule used above. Do not assume the Act reaches every real-property contract: its own definitions (§ 28-2-2101) limit “construction contract” to a WRITTEN agreement between an owner and a contractor to construct, improve, or provide construction management for an improvement to real property, and § 28-2-2107 takes out residential projects or improvements to real property intended for residential purposes with a total cost of less than $400,000. Suspension itself has its own procedural gate, § 28-2-2117: at least 7 calendar days' written notice before suspending or terminating, and a contractor may terminate only if the payment default is not cured within 30 days of suspension. That gate is one the contract may TIGHTEN but not loosen: the notice period applies “unless a shorter notice period is prescribed in the construction contract”, while § 28-2-2117(1)(d) provides that “[a] construction contract may not extend the time period for a contractor to suspend performance or terminate a construction contract under this subsection (1).” One more default worth knowing on a staged job: “[r]etainage must be released upon the final acceptance of each portion of work for which a separate price is stated in the construction contract” (§ 28-2-2110(3)), so a single release at project end is not what the statute contemplates.
21 authorities
- statuteMont. Code Ann. § 28-2-2110enactment date not established
The words that state the rule
The maximum retainage applied to construction contracts subject to the provisions of this part may not exceed 5%.
- statuteMont. Code Ann. § 28-2-2116enactment date not established
The words that state the rule
A provision, covenant, clause, or understanding that is in, collateral to, or affects a construction contract and that states that a party to the contract may not suspend performance under the contract or terminate the contract if another party to the contract fails to make prompt payments under the contract as provided in 28-2-2103 is against the public policy of this state and is void and unenforceable.
- statuteMont. Code Ann. § 28-2-2116enactment date not established
The words that state the rule
A provision, covenant, clause, or understanding that is in, collateral to, or affects a construction contract for a project in this state and that makes the contract subject to the laws of another state or that requires any litigation, arbitration, or other dispute resolution proceeding arising from a dispute pertaining to the contract to be conducted in another state is against the public policy of this state and is void and unenforceable.
- case318 P.3d 678Jem Contracting, Inc. v. Morrison-Maierle, Inc.Mont.decided 2014read it at the source ↗
The words that state the rule
JEM asserts this provision is void under § 28-2-2116(2), MCA, which provides: 6 A provision, covenant, clause, or understanding that is in, collateral to, or affects a construction contract and that states that a party to the contract may not suspend performance under the contract or terminate the contract if another party to the contract fails to make prompt payments under the contract as provided in 28-2-2103 is against the public policy of this state and is void and unenforceable.
- statuteMont. Code Ann. § 28-2-2103enactment date not established
The words that state the rule
Except as provided in 28-2-2115 , a contractor's request for payment is considered approved by the owner 21 days after receipt of the request by the owner or the person designated in the contract by the owner to receive the payment request unless, prior to that time, the owner provides the contractor with a written statement containing specific items in the request for payment that are being disapproved by the owner.
- statuteMont. Code Ann. § 28-2-2103enactment date not established
The words that state the rule
Except as provided in 28-2-2115 , if an owner approves all or a portion of a contractor's request for payment as provided in subsection (1)(b), the owner shall pay the contractor the approved amount within 7 days after the contractor's request for payment is approved.
- statuteMont. Code Ann. § 28-2-2103enactment date not established
The words that state the rule
Within 7 days after a contractor receives a periodic or final payment from an owner or a state agency, the contractor shall pay the subcontractor, if any, the full amount due the subcontractor in accordance with the subcontract for work performed or materials provided in accordance with that subcontract.
- statuteMont. Code Ann. § 28-2-2117enactment date not established
The words that state the rule
A contractor may suspend performance under a construction contract for failure by the owner to make timely payment of the amount approved pursuant to 28-2-2103 , and the contractor may terminate the construction contract if the payment obligations are not satisfied within 30 days of suspension.
- statuteMont. Code Ann. § 28-2-2117enactment date not established
The words that state the rule
A contractor shall provide written notice to the owner at least 7 calendar days before the contractor's intended suspension of performance or contract termination unless a shorter notice period is prescribed in the construction contract.
- statuteMont. Code Ann. § 28-2-2107enactment date not established
The words that state the rule
The provisions of this part do not apply to residential projects or improvements to real property intended for residential purposes with a total cost of less than $400,000.
- statuteMont. Code Ann. § 28-2-2101enactment date not established
The words that state the rule
"Construction contract" means a written agreement between an owner and a contractor for the contractor to construct or improve or to provide construction management for the construction or improvement of an improvement to real property.
- statuteMont. Code Ann. § 28-2-2110enactment date not established
The words that state the rule
The retainage percentage withheld by an owner, as provided in subsection (1), from a construction contractor is the maximum retainage that a construction contractor may withhold from a subcontractor.
- case318 P.3d 678Jem Contracting, Inc. v. Morrison-Maierle, Inc.Mont.decided 2014read it at the source ↗
The words that state the rule
No Work shall be delayed or postponed pending resolution of any disputes or disagreements, except as permitted by Paragraph 15.04 or as Owner and Contractor may otherwise agree in writing.
- statuteMont. Code Ann. § 28-2-2115enactment date not established
The words that state the rule
An owner may change the number of days to approve a contractor's payment request to later than 21 days after the date the payment request is submitted if: (a) the construction contract in a clear and conspicuous manner specifically provides for a later approval date defined by a specified number of days after the payment request is submitted; and
- statuteMont. Code Ann. § 28-2-2115enactment date not established
The words that state the rule
An owner may make payments later than 7 days after the date that the contractor's request for payment is approved if: (a) the construction contract in a clear and conspicuous manner specifically provides for a later payment defined by a specified number of days after approval; and
- statuteMont. Code Ann. § 28-2-2104enactment date not established
The words that state the rule
If a periodic or final payment that is required by a construction contract to be paid by an owner to a contractor is delayed by more than 30 days from the date the payment is required by the contract to be made, the owner shall pay to the contractor interest, beginning on the day following the date when the payment is due, at the rate of 1 1/2% a month or a pro rata fraction of that amount on the unpaid balance.
- statuteMont. Code Ann. § 28-2-2104enactment date not established
The words that state the rule
Acceptance of the final payment releases any claim for interest on the payment.
- statuteMont. Code Ann. § 28-2-2105enactment date not established
The words that state the rule
In a civil action on a contract to enforce an obligation imposed by this part, the prevailing party is entitled to reasonable attorney fees and costs, both for trial and appeal. If the parties to a construction contract or subcontract use arbitration, the arbitrator may award fees and costs as the arbitrator may determine.
- statuteMont. Code Ann. § 28-2-2117enactment date not established
The words that state the rule
A construction contract may not extend the time period for a contractor to suspend performance or terminate a construction contract under this subsection (1).
- statuteMont. Code Ann. § 28-2-2110enactment date not established
The words that state the rule
Retainage must be released upon the final acceptance of each portion of work for which a separate price is stated in the construction contract.
- case318 P.3d 678Jem Contracting, Inc. v. Morrison-Maierle, Inc.Mont.decided 2014read it at the source ↗
The words that state the rule
It is undisputed that JEM failed to follow the specific notification procedure in the Contract for differing subsurface conditions that was required for payment. ¶24 Affirmed.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.