CHAPTER 344

FORMERLY

HOUSE BILL NO. 406

AS AMENDED BY HOUSE AMENDMENT NOS. 1 AND 5

AN ACT TO AMEND TITLE 6 RELATING TO BUILDING CONSTRUCTION PAYMENTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1. Amend Chapter 35, Title 6 of the Delaware Code by adding the following new sections:

Ҥ 3507. Payments Due.

(a) The owner shall pay the contractor strictly in accordance with terms of the contact.

(b) If the terms of the contract do not contain a term governing payment, the contractor shall be entitled to submit an invoice to the owner for payments at the end of the billing period for:

(1) work already commenced but not fully completed and/or

(2) materials already supplied,

if the agreed upon work is completed at the end of such billing period.

(c) If the contract between the owner and a contractor, or between contractors, does not contain a provision governing when invoices may be submitted, a contractor shall be entitled to submit a final invoice for payment in full when the agreed upon work is fully completed.

(d) If a subcontractor payment terms are not specified in the contract between the owner and a general or prime contractor, or in the contract between the general or prime contractor and a subcontractor, or in the contract between the subcontractors, a general contractor, prime contractor or subcontractor shall pay all undisputed amounts owned to its subcontractors, suppliers and/or materielmen within fifteen (15) days after receipt by the general contractor, prime contractor or subcontractor of each payment received for work performed or materials supplied by its subcontractors, suppliers and/or materielmen. This Subsection shall not be construed to impair the right of an owner or contractor to include in a subcontract provisions that permit the owner or contractor to retain a specified percentage of each progress payment otherwise due to a subcontractor and each supplier for satisfactory performance under the subcontract.

(e) If a subcontractor performs in accordance with the provisions of its contract, the subcontractor shall be entitled to payment from the party with whom the subcontractor has contracted, in accordance with the payment terms of its contract or this Section, whichever applies; provided, however, that a provision in a contingent payment clause in a construction contract which:

(1) states that a contractor assumes the risk of nonpayment of the owner:

(2) requires a contractor to waive any statutory or other right to commence litigation or arbitration until payment is made to the general or prime contractor;

(3) makes subject to payment by the owner the obligation of a contractor and its surety under any payment or performance bond to make any payment to a claimant under such bond; or

(4) states that a contractor relies on the credit of the owner, and not on the credit of the general or prime contractor or of a bonding company, is contrary to the public policy of this State and shall be void and unenforceable.

(f) This section shall not apply to public works contracts awarded under Chapter 69, Title 29.

§ 3508. Procedure for Dispute of Claims.

(a) If a contractor disputes any amounts stated in an invoice for payment, then

(1) the contractor must notify the subcontractor in writing within seven (7) days of the contractor’s receipt of the disputed invoice, and

(2) the contractor must be specific as to those items within the invoice that are disputed; and

(b) If notice of dispute is not given within the time required by this section, then the invoice is deemed to be accepted as submitted.

(c) If notice of dispute is not given within the time required by this section, such lack of notice does not constitute acceptance of the work performed.

(d) This section shall not apply to public works contracts awarded under Chapter 69, Title 29.

(e) This Section shall not apply where the terms of a contract between a general or prime contractor and a subcontractor specify a difference procedure for disputing claims for payment.

§ 3509. Attorneys’ Fees and Litigation Costs.

(a) Award of attorneys’ fees and arbitration costs. If arbitration or litigation is commenced to recover payment due under this Act and it is determined that the contractor or subcontractor has failed to comply with the payment terms of this Act, the arbitrator or court shall award damages due equal to the amount that is determined by the arbitrator or court to have been wrongfully withheld. An amount shall not be deemed to have been wrongfully withheld to the extent that it bears a reasonable relationship to the value of any disputed amount or claim held in good faith by the owner, contractor or subcontractor against whom the contractor or subcontractor is seeking to recover payment.

(b) Absent any agreements to the contrary between the parties, the arbitrator in any arbitration proceeding arising under this Act shall award to the substantially prevailing party its reasonable attorneys’ fees, arbitration costs, and expenses for expert witnesses.

(c) This section shall not apply to public works contracts awarded under Chapter 69, Title 29.

(d) This Section shall not apply where the terms of a contract between a general or prime contractor and subcontractor specifies different terms regarding the award of attorney fees and litigation costs in an arbitration or judicial proceeding."

Approved June 30, 2002