2023 New York Laws › GBS - General Business › Article 35-E - Construction Contracts › 756-A - Obligations.

§  756-a. Obligations. It is the policy and purpose of this article to
expedite payment of all monies owed to  those  who  perform  contracting
services   pursuant  to  construction  contracts.  Except  as  otherwise
provided in this article, the terms and  conditions  of  a  construction
contract  shall  supersede the provisions of this article and govern the
conduct of the parties thereto.
1. Billing cycle. The parties  to  a  construction  contract  may,  by
mutual  agreement,  establish  a  billing  cycle  for  the submission of
invoices  requesting  payment  for  work   performed   pursuant   to   a
construction  contract. In the absence of an agreement by the parties as
to the billing cycle, the billing cycle  shall  be  the  calendar  month
within which the work is performed.
2.  Invoices.  (a) A contractor shall be entitled to invoice the owner
for interim payments at the end of the billing cycle. A contractor shall
be entitled to submit a final invoice for payment in full upon  reaching
substantial completion, as such term is defined in the contract or as it
is contemplated by the terms of the contract.
(i)  Upon  delivery  of  an  invoice  and  all  contractually required
documentation, an owner shall approve or disapprove all or a portion  of
such  invoice  within  twelve  business days. Owner approval of invoices
shall not be unreasonably withheld nor shall  an  owner,  in  bad  faith
disapprove  all  or  a  portion  of  an invoice. If an owner declines to
approve an invoice or a portion thereof, it must  prepare  and  issue  a
written  statement  describing  those  items in the invoice that are not
approved. An owner may decline to approve an invoice or  portion  of  an
invoice for:
(1) Unsatisfactory or disputed job progress;
(2) Defective construction work or material not remedied;
(3) Disputed work materials;
(4)   Failure   to  comply  with  other  material  provisions  of  the
construction contract;
(5) Failure of the  contractor  to  make  timely  payments  for  labor
including  collectively  bargained fringe benefit contributions, payroll
taxes and insurance, equipment and materials, damage to  the  owner,  or
reasonable  evidence  that the construction contract cannot be completed
for the unpaid balance of the construction contract sum; or
(6) Failure of the owner's architect to certify payment for any or all
of the reasons set forth in this section so  long  as  the  reasons  are
included in the owner's written statement of disapproval.
(ii)  Upon  delivery  of  an  invoice  and  all contractually required
documentation, a contractor or subcontractor shall approve or disapprove
all or a portion of such invoice within twelve business days. Contractor
and  subcontractor  approval  of  invoices  shall  not  be  unreasonably
withheld  nor  shall  a  contractor  or  subcontractor,  in  bad  faith,
disapprove all or a portion of an invoice. Nothing in this section shall
prohibit the contractor or subcontractor, at the time of application  to
the  owner or contractor, from withholding such application to the owner
or contractor for payment to the subcontractor or material supplier for:
(1) Unsatisfactory or disputed job progress;
(2) Defective construction work or material not remedied;
(3) Disputed work;
(4)  Failure  to  comply  with  other  material  provisions   of   the
construction contract; or
(5)  Failure  of  the  subcontractor to make timely payments for labor
including collectively bargained fringe benefit  contributions;  payroll
taxes  and  insurance,  equipment and materials, damage to contractor or
another subcontractor or material supplier, or reasonable evidence  that

the  subcontract  cannot  be  completed  for  the  unpaid balance of the
subcontract sum.
(b)  Nothing in this subdivision shall authorize the withholding of an
application  to  the  owner  or  contractor  for  the   payment   to   a
subcontractor  or  material supplier when due to a delay in job progress
by the owner, contractor or another subcontractor or  material  supplier
other  than  the  applicant  or  applicant's  subcontractor  or material
supplier.
3. Payment. (a) The owner's payment  of  a  contractor's  interim  and
final  invoices shall be made on the basis of a duly approved invoice of
work performed and the material supplied during the billing cycle.
(i) Unless the provisions of this article provide otherwise, the owner
shall pay the contractor strictly in accordance with the  terms  of  the
construction contract.
(ii)  Payment  of  an  interim  or final invoice shall be due from the
owner not later than thirty days after approval of the invoice.
(iii) If payment by the owner  is  contingent  upon  lender  approval,
payment of a contractor's interim or final invoice or the amount of loan
proceeds disbursed by the lender for payment of the contractor's interim
or final invoice shall be due from the owner seven days after receipt by
the  owner  of  good  funds except where the provisions of section seven
hundred fifty-six-d of this article applies.
(iv) An owner may withhold from an interim payment only an amount that
is sufficient to pay the costs and expenses the owner reasonably expects
to incur in order to cure the defect or correct any items set  forth  in
writing pursuant to subparagraph (i) of paragraph (a) of subdivision two
of  this  section,  or  in the alternative, to withhold an amount not to
exceed the line item amount appearing in the agreed schedule  of  values
together  with  any  change  orders, additions and/or deletions, if such
schedule has been previously submitted, and/or an amount  sufficient  to
cover  liquidated  damages  as established in an agreed upon schedule in
the construction contract.
(b) The contractor or  subcontractor's  payment  of  subcontractor  or
material  supplier's interim or final invoice shall be made on the basis
of a duly approved invoice of the work performed and materials  supplied
during the billing cycle.
(i)  Unless  the  provisions  of  this  article provide otherwise, the
contractor or subcontractor shall  pay  the  subcontractor  strictly  in
accordance with the terms of the construction contract. Performance by a
subcontractor  in  accordance  with the provisions of its contract shall
entitle  it  to  payment  from  the  party  with  which  it   contracts.
Notwithstanding   this   article,  where  a  contractor  enters  into  a
construction contract with a subcontractor  as  agent  for  a  disclosed
owner,  the  payment  obligation  shall flow directly from the disclosed
owner as principal to the subcontractor and through the agent.
(ii) When  a  subcontractor  has  performed  in  accordance  with  the
provisions of its construction contract, the contractor shall pay to the
subcontractor,   and  each  subcontractor  shall  in  turn  pay  to  its
subcontractors, the full or proportionate amount of funds received  from
the  owner  for each subcontractor's work and materials based on work or
services provided under the  construction  contract,  seven  days  after
receipt  of  good  funds for each interim or final payment, provided all
contractually required documentation and waivers are received.
(iii) A contractor or subcontractor may withhold amounts received from
an owner in connection with an interim payment due to a subcontractor or
material supplier only such sums that are sufficient to pay  the  direct
expenses  as  are reasonable to correct deficiencies identified pursuant
to subparagraph (ii)  of  paragraph  (a)  of  subdivision  two  of  this

section,  or in the alternative, to withhold an amount not to exceed the
line item amount appearing in the agreed schedule  of  values,  together
with any change order, additions or deletions, if such schedule has been
previously submitted.
(iv)  If a contractor, after submitting an invoice to an owner under a
construction contract, but before making a payment to a subcontractor or
material  supplier  for  the  subcontractor's  or  material   supplier's
performance  covered by such invoice, discovers that all or a portion of
the payment otherwise due to the subcontractor or material  supplier  is
subject  to  withholding  from the subcontractor or material supplier in
accordance with the construction contract and the conditions  set  forth
in  subparagraph  (ii)  of  paragraph  (a)  of  subdivision  two of this
section, then the contractor shall:
(1) As soon as practicable upon ascertaining the cause giving rise  to
a withholding, but prior to the due date for a subcontractor or material
supplier  payment, furnish to the subcontractor or material supplier and
the owner  written  notice  of  withholding  specifying  conditions  for
withholding payment and identifying the amount to be withheld;
(2)  Reduce the subcontractor's or material supplier's interim payment
by an amount not to  exceed  the  amount  specified  in  the  notice  of
withholding; and
(3) Pay the subcontractor or material supplier amounts withheld within
seven  days after correction of the identified subcontractor or material
supplier  performance   deficiency   and   receipt   of   all   required
documentation  and  waivers,  unless the funds therefor must be obtained
from the owner's  next  interim  payment  due  to  a  reduction  in  the
contractor's  billing  directly  resulting  from  the subcontractor's or
material supplier's performance deficiency identified in the  notice  of
withholding.
(c)  A  written notice of any withholding under this subdivision shall
be issued to a subcontractor or material supplier specifying:
(i) The amount to be withheld;
(ii) The specific causes  for  withholding  under  the  terms  of  the
construction contract and pursuant to this subdivision;
(iii)  The remedial actions necessary to be taken by the subcontractor
or material supplier  in  order  to  receive  payments  of  the  amounts
withheld; and
(iv) The documentation and waivers required.
4.   Notice.  A  contractor  or  subcontractor  shall  disclose  to  a
subcontractor, at the time the construction subcontract is entered into,
the due date for receipt of payments to the contractor or  subcontractor
from  the owner or the contractor as the case may be. If a contractor or
subcontractor  fails  to  accurately  disclose  the  due   date   to   a
subcontractor, the contractor or subcontractor shall be obligated to pay
the  subcontractor  as though the due dates established in paragraph (a)
of subdivision three of this section were met by the owner. In addition,
upon written request of a subcontractor, the owner shall provide  notice
to  such  subcontractor  within five days of making any interim or final
payment to the contractor. The subcontractor's request shall  remain  in
effect for the duration of the subcontractor's work on the project.