When must we be paid on this Nebraska construction contract, and what does the pay-when-paid clause do?
Thirty days from the owner, ten days down the chain, forty-five days for retainage, and the interest remedy is conditional on a notice almost nobody gives. Neb. Rev. Stat. § 45-1203(1): “the owner shall pay the contractor within thirty days after receipt by the owner or the owner's representative of a payment request made pursuant to the contract”. Subsection (2) runs the chain, once “all conditions precedent to payment contained in the subcontract have been satisfied”, “within ten days after receipt by the contractor or subcontractor of each periodic or final payment, the full amount received for the subcontractor's work and materials”. Retainage, subsection (3): “The owner or the owner's representative shall release and pay all retainage for work completed in accordance with the provisions of the contract within forty-five days after the project, or a designated portion thereof, is substantially complete”, and then “the contractor shall pay all retainage due such subcontractor within ten days after receipt of the retainage”. Retainage is capped by § 45-1204(1) “in an amount not to exceed the amount specified in the applicable contract, which shall not exceed a rate of ten percent”, stepping down so that “no more than five percent of any additional progress payment may be withheld as retainage” once the party's scope is fifty percent complete, and then only “if the contractor or subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work”, and after substantial completion withholding is limited to “an amount not to exceed one hundred twenty-five percent of the estimated cost to complete the work remaining on the contract”. Interest for late payment is 1% a month under § 45-1205, “[e]xcept as provided in section 45-1204”, and it runs “beginning on the day following the payment due date at the rate of one percent per month or a pro rata fraction thereof on the unpaid balance”. Three clause types are void for construction work performed in Nebraska under § 45-1209: a waiver of bond-claim rights beyond payment actually received, “[a] provision that purports to make any state law other than that of Nebraska applicable to or governing any contract for construction within the state”, and “[a] provision that purports to require that the venue for a court or arbitration hearing be held at any location outside of the state.” § 45-1211 adds a private action in which “the court may award a plaintiff reasonable attorney's fees and costs as the court determines is appropriate.” On pay-when-paid, the authorities checked establish nothing: Nebraska has no decision construing such a clause, and § 45-1203(2)'s deference to “conditions precedent … contained in the subcontract” presupposes an answer rather than giving one.
The trap
The 1% a month looks like an automatic remedy and it is conditional twice over, in the same sentence pair. § 45-1205: “Interest is due under this section only after the person charged the interest has been notified of the provisions of this section by the contractor or subcontractor. Acceptance of progress payments or a final payment shall release all claims for interest on such payments.” So a subcontractor who performs, waits ninety days and then bills 1% a month has NO interest claim unless it had already notified the party it is charging, put the notice in the subcontract or the first pay application, and every late progress payment it cashes extinguishes the interest on that payment. Four scope traps sit in front of the remedy. § 45-1208: the Act “applies to contracts or subcontracts entered into on or after October 1, 2010”. § 45-1207: it “does not apply to improvements to real property intended for residential purposes when the residence consists of no more than four residential units”. § 45-1202 writes the State out on both sides: “Owner includes a person, an entity, or any political subdivision of this state. Owner does not include the State of Nebraska”, and “Contractor does not include an individual or an entity performing work on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision”. And political-subdivision work carries a cliff: § 45-1210 requires that “[a]ll claims shall be filed within one hundred eighty days after the date of substantial completion of the construction project.” STATE WORK FALLS BETWEEN TWO STATUTES AND HIGHWAY WORK FALLS THROUGH BOTH. A state-agency contract is outside this Act and inside the Prompt Payment Act, §§ 81-2401 to 81-2408, whose § 81-2403 requires payment “on or before the forty-fifth calendar day” and whose § 81-2404 bars an interest claim “unless the agency is requested to pay the interest charges within ninety calendar days from the date on which payment in full is due”: a second notice condition on a second clock. But § 81-2407 excludes “Contracts related to highway or road construction, reconstruction, or maintenance”, and § 45-1202 has already excluded state work, so state road construction has no statutory prompt-pay right at all under the statutes read here. Last: § 45-1204 is a ceiling, not a grant. Its non-retainage withholdings are permitted only “to the extent that such withholding is allowed in the contract”, so if the subcontract does not authorise the withholding the statute does not supply it.
27 authorities
- statuteNeb. Rev. Stat. § 45-1203enactment date not established
The words that state the rule
the owner shall pay the contractor within thirty days after receipt by the owner or the owner's representative of a payment request made pursuant to the contract
- statuteNeb. Rev. Stat. § 45-1203enactment date not established
The words that state the rule
The owner or the owner's representative shall release and pay all retainage for work completed in accordance with the provisions of the contract within forty-five days after the project, or a designated portion thereof, is substantially complete.
- statuteNeb. Rev. Stat. § 45-1203enactment date not established
The words that state the rule
the contractor shall pay all retainage due such subcontractor within ten days after receipt of the retainage.
- statuteNeb. Rev. Stat. § 45-1204enactment date not established
The words that state the rule
When work has been performed pursuant to a contract, an owner, a contractor, or a subcontractor may only withhold payment: (1) For retainage, in an amount not to exceed the amount specified in the applicable contract, which shall not exceed a rate of ten percent
- statuteNeb. Rev. Stat. § 45-1204enactment date not established
The words that state the rule
no more than five percent of any additional progress payment may be withheld as retainage if the contractor or subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work
- statuteNeb. Rev. Stat. § 45-1204enactment date not established
The words that state the rule
After substantial completion, in an amount not to exceed one hundred twenty-five percent of the estimated cost to complete the work remaining on the contract.
- statuteNeb. Rev. Stat. § 45-1205enactment date not established
The words that state the rule
Except as provided in section 45-1204 , if a periodic or final payment to (1) a contractor is delayed by more than thirty days after receipt of a properly submitted periodic or final payment request by the owner or owner's representative or (2) a subcontractor is delayed by more than ten days after receipt of a periodic or final payment by the contractor or subcontractor, then the remitting owner, contractor, or subcontractor shall pay the contractor or subcontractor interest due until such amount is paid, beginning on the day following the payment due date at the rate of one percent per month or a pro rata fraction thereof on the unpaid balance
- statuteNeb. Rev. Stat. § 45-1205enactment date not established
The words that state the rule
Interest is due under this section only after the person charged the interest has been notified of the provisions of this section by the contractor or subcontractor. Acceptance of progress payments or a final payment shall release all claims for interest on such payments.
- statuteNeb. Rev. Stat. § 45-1207enactment date not established
The words that state the rule
The Nebraska Construction Prompt Pay Act does not apply to improvements to real property intended for residential purposes when the residence consists of no more than four residential units.
- statuteNeb. Rev. Stat. § 45-1208enactment date not established
The words that state the rule
The Nebraska Construction Prompt Pay Act applies to contracts or subcontracts entered into on or after October 1, 2010.
- statuteNeb. Rev. Stat. § 45-1202enactment date not established
The words that state the rule
Contractor does not include an individual or an entity performing work on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision
- statuteNeb. Rev. Stat. § 45-1202enactment date not established
The words that state the rule
Owner includes a person, an entity, or any political subdivision of this state. Owner does not include the State of Nebraska
- statuteNeb. Rev. Stat. § 45-1206enactment date not established
The words that state the rule
The Nebraska Construction Prompt Pay Act shall not modify the remedies available to any person under the terms of a contract in existence prior to October 1, 2010, or by any other statute.
- statuteNeb. Rev. Stat. § 45-1209enactment date not established
The words that state the rule
A provision that purports to make any state law other than that of Nebraska applicable to or governing any contract for construction within the state; or
- statuteNeb. Rev. Stat. § 45-1209enactment date not established
The words that state the rule
A provision that purports to require that the venue for a court or arbitration hearing be held at any location outside of the state.
- statuteNeb. Rev. Stat. § 45-1210enactment date not established
The words that state the rule
All claims shall be filed within one hundred eighty days after the date of substantial completion of the construction project.
- statuteNeb. Rev. Stat. § 45-1211enactment date not established
The words that state the rule
In addition to an award of damages, the court may award a plaintiff reasonable attorney's fees and costs as the court determines is appropriate.
- statuteNeb. Rev. Stat. § 81-2403enactment date not established
The words that state the rule
Except as provided in subsection (2) of this section, each agency shall make payment in full for all goods delivered or services rendered on or before the forty-fifth calendar day
- statuteNeb. Rev. Stat. § 81-2407enactment date not established
The words that state the rule
The Prompt Payment Act shall not apply to the following: (1) Claims subject to a good faith dispute if notice of the dispute is conveyed to the creditor in writing before the time required for payment, except that the Prompt Payment Act shall take effect on the date that the dispute is resolved; (2) Contracts related to highway or road construction, reconstruction, or maintenance; and (3) Claims, contracts, or projects which are to be paid for exclusively with federal funds.
- statuteNeb. Rev. Stat. § 81-2404enactment date not established
The words that state the rule
No claim by a creditor for interest charges shall be allowed unless the agency is requested to pay the interest charges within ninety calendar days from the date on which payment in full is due.
- statuteNeb. Rev. Stat. § 45-1203enactment date not established
The words that state the rule
When a subcontractor has performed work in accordance with the provisions of a subcontract and all conditions precedent to payment contained in the subcontract have been satisfied, the contractor shall pay the subcontractor and the subcontractor shall pay his, her, or its subcontractor, within ten days after receipt by the contractor or subcontractor of each periodic or final payment, the full amount received for the subcontractor's work and materials based on work completed or service provided under the subcontract for which the subcontractor has properly requested payment, if the subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work.
- statuteNeb. Rev. Stat. § 45-1204enactment date not established
The words that state the rule
(2) Of a reasonable amount, to the extent that such withholding is allowed in the contract, for any of the following reasons: (a) Reasonable evidence showing that the contractual completion date will not be met due to unsatisfactory job progress; (b) Third-party claims filed or reasonable evidence that such a claim will be filed with respect to work under the contract; or (c) Failure of the contractor to make timely payments for labor, equipment, subcontractors, or materials
- statuteNeb. Rev. Stat. § 45-1209enactment date not established
The words that state the rule
The following provisions in any contract or subcontract for construction work performed within the State of Nebraska shall be against public policy and shall be void and unenforceable:
- statuteNeb. Rev. Stat. § 81-2403enactment date not established
The words that state the rule
(2) Any agency making payment for goods or services provided for third parties shall make payment in full for such goods or services on or before the sixtieth calendar day after the date of receipt by the agency of the bill.
- statuteNeb. Rev. Stat. § 45-1201enactment date not established
The words that state the rule
Sections 45-1201 to 45-1211 shall be known and may be cited as the Nebraska Construction Prompt Pay Act.
- statuteNeb. Rev. Stat. § 81-2401enactment date not established
The words that state the rule
Sections 81-2401 to 81-2408 shall be known and may be cited as the Prompt Payment Act.
- statuteNeb. Rev. Stat. § 81-2402enactment date not established
The words that state the rule
Agency shall mean the state and any agency, department, office, commission, board, panel, or division of the state. Agency shall include the University of Nebraska and the Nebraska state colleges
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.