The Prompt Pay Act, Nebraska Revised Statutes § 45-1201 to 41-1210, applies to construction contracts entered into after October 1, 2010. This is the second of two posts highlighting the key provisions of the Prompt Payment Act.
When Payments May be Withheld
The Act allows a contractor to withhold payments in five situations:
- Retainage, as provided for in the contract, until the project is substantially completed;
- After substantial completion, 125% of the estimated cost to complete the contractor’s work;
- If the completion date will not be met;
- If claims have been filed or if claims are expected to be filed; and
- If a contractor or subcontractor has failed to make timely payments to its subcontractors or suppliers.
Certain Contract Provisions are Void
The Act now declares that three contact provisions are void as against public policy will not be enforced by Nebraska courts when the project is located in Nebraska.
Venue. The contract may not require a party to bring a lawsuit or attend arbitration outside of Nebraska. These provisions, referred to as venue clauses, often times required you to litigate or arbitrate in another state.
Choice of Law. The contract may not dictate that another state’s law will control the interpretation of the contract. These provisions, referred to as choice of law clauses, often times provided that another state’s law, generally the home state of the owner or upstream contractor, would control.
Waiver of Bond Claim. The contract may not require you to waive your right to make a claim on a performance or payment bond. You may be required to waive or release these rights as a condition for payment, but only to the extent of the amount you receive.
The Prompt Payment Act clarifies your rights and obligations under construction contracts. And it supports Nebraska construction companies by requiring Nebraska courts here construction disputes and apply and Nebraska law to these disputes.