CHAPTER 357

FORMERLY

SENATE BILL NO. 302

AS AMENDED BY

SENATE AMENDMENT NO. 2

AN ACT TO AMEND TITLE 6 OF THE DELAWARE CODE RELATING TO BUILDING AND CONSTRUCTION PAYMENTS.

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

Section 1. Amend §3501, Title 6 of the Delaware Code, by adding new paragraphs as follows:

“(3) ‘Owner’ means a person who has an interest in the lands or premises upon which a contractor has undertaken to erect, construct, complete, alter or repair any building or addition to a building.

(4) ‘Person’ shall include a corporation, partnership, limited liability corporation or partnership, business trust, other association, estate trust, foundation or a natural person.

(5) ‘Subcontractor’ means a person who enters into a contract to furnish labor and/or materials to a contractor.”

(6) ‘Billing period’ means the payment cycle agreed to by the parties, or, in the absence of an agreement, the calendar month within which the work is performed.

Section 2. Amend §3506(a), Title 6 of the Delaware Code, by renumbering existing subsections (a), (b), (c), (d) and (e) as (b), (c), (d), (e) and (f) respectively, and by inserting the following as new subsection (a):

“(a) Each construction contract awarded by an owner shall include:

(1) A payment clause which obligates the owner to pay the contractor for satisfactory performance under the contract within 30 days of the end of the billing period;

(2) An interest penalty clause which obligates the owner to pay the contractor an interest penalty on amounts due in the case of each payment not made in accordance with the payment clause included in the contract pursuant to subparagraph (1) of this subsection.

(3) The clause required by this subsection shall not be construed to impair the right of the owner to include in its contracts provisions which permit the owner to retain a specified percentage of each progress payment otherwise due to a contractor for satisfactory performance under the contract without incurring any obligation to incur an interest penalty, in accordance with the terms and conditions agreed to by the parties to the contract. In such a case, the owner must provide written notice to contractor as to why payment is being withheld within 7 days of the date required for payment to the contractor.”

Section 3. Amend §3506(d), Title 6 of the Delaware Code by striking the phrase “subsection (a)” where it appears and substituting in lieu thereof the phrase “subsection (b)”.

Section 4. Amend §3506(e), Title 6 of the Delaware Code by striking the phrase “subsection (c)” where it appears and substituting in lieu thereof the phrase “subsections (a)(3) or (d)”.

Section 5. Amend §3507(c), Title 6 of the Delaware Code by adding at the end, the following sentences:

“The owner shall pay all undisputed amounts owed to the contractor within 30 days after the end of the billing period or 30 days after delivery of the invoice, whichever is later. This subsection shall not be construed to impair the right of an owner to include in a contract provisions that permit the owner to retain a specified percentage of each progress payment otherwise due to a contractor and each supplier for satisfactory performance under the contract.”

Section 6. Amend §3507(f), Title 6 of the Delaware Code by striking subsection (f) and substituting in lieu thereof the following:

“(f) This section shall not apply to:

(1) Public works contracts awarded under Chapter 69 of Title 29;

(2) Contracts for the erection of six or fewer residential units which are under construction simultaneously, or for the alteration or repair of any single residential unit; or

(3) Contracts for the purchase of materials by a person performing work on his or her own real property.”

Section 7. Amend §3508, Title 6 of the Delaware Code by striking subsection (a) thereof and substituting in lieu thereof the following:

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

(1) The party disputing the invoice must notify the other party in writing within 7 days of the receipt of the disputed invoice; and

(2) The party disputing the invoice must be specific as to those items within the invoice that are disputed.”

Section 8. Further amend §3508, Title 6 of the Delaware Code by striking subsection (d) and substituting in lieu thereof the following:

“(d) This section shall not apply:

(1) To public works contracts awarded under Chapter 69 of Title 29;

(2) To contracts for the erection of six or fewer residential units which are under construction simultaneously, or for the alteration or repair of any single residential unit;

(3) To contracts for the purchase of materials by a person performing work on his or her own real property; or

(4) Where the terms of a contract specify a different procedure for disputing claims for payment.”

Section 9. Amend §3509(a), Title 6 of the Delaware Code by striking the phrase “determined that the contractor or subcontractor” and substituting in lieu thereof the phrase “determined that the owner, contractor or subcontractor”.

Section 10. Amend §3509(c), Title 6 of the Delaware Code by striking subsection (c) and substituting in lieu thereof the following:

“(c) This section shall not apply to:

(1) Public works contracts awarded under Chapter 69 of Title 29;

(2) Contracts for the erection of six or fewer residential units which are under construction simultaneously, or for the alteration or repair of any single residential unit; or

(3) Contracts for the purchase of materials by a person performing work on his or her own real property.”

Section 11. This Act shall apply to contracts entered into 30 days or more following its enactment into law.

Approved July 12, 2004