HOUSE BILL NO. 448
INTRODUCED BY G. FORRESTER, GLASER
A BILL FOR AN ACT ENTITLED: "AN ACT PROVIDING THAT A CONTRACTOR'S REQUEST
FOR PAYMENT IS CONSIDERED APPROVED BY THE OWNER UNLESS THE OWNER
WITHIN 30 21 DAYS OF THE REQUEST, ON CERTAIN GROUNDS, DECLINES TO PAY;
ESTABLISHING CONDITIONS AND REQUIREMENTS UNDER WHICH A CONTRACTOR OR
SUBCONTRACTOR MAY SUSPEND OR TERMINATE A CONSTRUCTION CONTRACT;
PROVIDING THAT CERTAIN PROVISIONS IN CONSTRUCTION CONTRACTS ARE VOID AS
AGAINST PUBLIC POLICY; AMENDING SECTION 28-2-2103, MCA; REPEALING SECTION
28-2-2107, MCA; AND PROVIDING AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 28-2-2103, MCA, is amended to read:
"28-2-2103. Payment to contractor and subcontractor. (1) (a) If a contractor performs a
construction contract according to the terms of the contract and requests, either directly to the owner or
to the owner's representative, payment for performance of the contract, the owner shall pay the
contractor, within 30 days after receipt by the owner or the owner's representative of the request for
payment, for work performed or materials provided in accordance with the contract BY MUTUAL
AGREEMENT WITH A CONTRACTOR, AN OWNER MAY MAKE PROGRESS PAYMENTS ON
CONSTRUCTION CONTRACTS OF LESS THAN 60 DAYS. AN OWNER SHALL MAKE
PROGRESS PAYMENTS TO A CONTRACTOR ON ALL OTHER CONSTRUCTION
CONTRACTS. PROGRESS PAYMENTS MUST BE MADE ON THE BASIS OF A DULY
CERTIFIED AND APPROVED BILLING OR ESTIMATE OF THE WORK PERFORMED AND
THE MATERIALS SUPPLIED DURING THE PRECEDING MONTHLY BILLING CYCLE.
(b) A contractor's request for payment must be considered approved by the owner 30 21 days after
receipt of the request by the owner or the owner's representative unless prior to that time, the owner or
the owner's representative provides the contractor with a written statement containing the specific items
in the request for payment that are being disapproved by the owner or the owner's representative.
(c) The owner or the owner's representative may disapprove the request for payment or a portion of the request based upon a claim of:
(i) unsatisfactory job progress;
(ii) failure to remedy defective construction work or materials;
(iii) disputed work or materials;
(iv) failure to comply with material provisions of the construction contract;
(v) failure of a contractor or subcontractor to make timely payment for labor, equipment, or
materials;
(vi) damage to the owner; or
(vii) the existence of reasonable evidence that the construction contract cannot be completed for the unpaid balance of the contract sum.
(D) THE OWNER OR THE OWNER'S REPRESENTATIVE IS CONSIDERED TO HAVE RECEIVED THE REQUEST FOR PAYMENT WHEN THE REQUEST FOR PAYMENT IS SUBMITTED TO ANY PERSON DESIGNATED BY THE OWNER OR THE OWNER'S REPRESENTATIVE FOR THE RECEIPT OF THE REQUEST FOR PAYMENT.
(d)(E) An owner or owner's representative may only withhold an amount from a payment that is
sufficient to pay the direct expenses that the owner reasonably expects to incur to correct any of the
items set out in subsection (1)(c).
(e)(F) A written statement by an owner or owner's representative must contain a detailed account of
all alleged problems for which the payment or a portion of the payment is being withheld BE
FURNISHED TO THE CONTRACTOR SPECIFYING THE CONDITIONS PURSUANT TO
SUBSECTION (1)(C) FOR WITHHOLDING APPROVAL OF THE REQUEST FOR PAYMENT OR
A PORTION OF THE REQUEST FOR PAYMENT AND IDENTIFYING THE AMOUNT TO BE
WITHHELD FOR EACH CONDITION. If an owner or owner's representative disapproves only a
portion of a request for payment, the remainder of the request for payment must be considered
approved.
(G) IF AN OWNER APPROVES ALL OR A PORTION OF A CONTRACTOR'S REQUEST FOR PAYMENT AS PROVIDED FOR IN SUBSECTION (1)(B), THE OWNER SHALL PAY THE CONTRACTOR THE APPROVED AMOUNT WITHIN 3 WORKING DAYS AFTER THE CONTRACTOR'S REQUEST FOR PAYMENT IS CONSIDERED APPROVED.
(f)(H) Upon written request of a subcontractor, an owner or owner's representative shall notify the
subcontractor of any progress payment or final payment made to the contractor within 5 days of issuing
the payment. THE SUBCONTRACTOR'S REQUEST MUST REMAIN IN EFFECT FOR THE
DURATION OF THE SUBCONTRACTOR'S WORK ON THE PROJECT OR UNTIL THE
SUBCONTRACTOR HAS BEEN FULLY PAID.
(I) PAYMENT IS NOT REQUIRED UNDER THIS SECTION UNLESS THE CONTRACTOR PROVIDES THE OWNER OR THE OWNER'S REPRESENTATIVE WITH A BILLING OR ESTIMATE FOR THE WORK PERFORMED OR THE MATERIAL SUPPLIED IN ACCORDANCE WITH THE TERMS OF THE CONSTRUCTION CONTRACT.
(2) Within 3 working days after a contractor receives a periodic or final payment from an owner or a state agency, the contractor shall pay the subcontractor, if any, the full amount due the subcontractor in accordance with the subcontract for work performed or materials provided in accordance with that subcontract. PAYMENT IS NOT REQUIRED UNDER THIS SECTION UNLESS THE SUBCONTRACTOR OR MATERIAL SUPPLIER PROVIDES TO THE CONTRACTOR OR THE SUBCONTRACTOR A BILLING OR INVOICE FOR THE WORK PERFORMED OR THE MATERIAL SUPPLIED IN COMPLIANCE WITH THE TERMS OF THE CONTRACT BETWEEN THE PARTIES.
(3) Within 3 working days after a subcontractor receives a periodic or final payment from a contractor, the subcontractor shall pay another subcontractor, if any, the full amount due the subcontractor under the subcontract for work performed or materials provided in accordance with that subcontract. PAYMENT IS NOT REQUIRED UNDER THIS SECTION UNLESS THE SUBCONTRACTOR OR MATERIAL SUPPLIER PROVIDES TO THE CONTRACTOR OR THE SUBCONTRACTOR A BILLING OR INVOICE FOR THE WORK PERFORMED OR MATERIAL SUPPLIED IN COMPLIANCE WITH THE TERMS OF THE CONTRACT BETWEEN THE PARTIES.
(4) NOTHING IN THIS SECTION PREVENTS A CONTRACTOR OR SUBCONTRACTOR FROM DISAPPROVING A SUBCONTRACTOR'S REQUEST FOR PAYMENT OR A PORTION OF THE REQUEST FOR PAYMENT BASED UPON THE CLAIM OF:
(A) UNSATISFACTORY JOB PROGRESS;
(B) FAILURE TO REMEDY DEFECTIVE CONSTRUCTION WORK OR MATERIALS;
(C) DISPUTED WORK OR MATERIALS;
(D) FAILURE TO COMPLY WITH MATERIAL PROVISIONS OF THE CONSTRUCTION CONTRACT;
(E) FAILURE OF A CONTRACTOR OR SUBCONTRACTOR TO MAKE TIMELY PAYMENT FOR LABOR, EQUIPMENT, OR MATERIALS;
(F) DAMAGE TO THE CONTRACTOR OR OTHER SUBCONTRACTORS; OR
(G) THE EXISTENCE OF REASONABLE EVIDENCE THAT THE CONSTRUCTION CONTRACT CANNOT BE COMPLETED FOR THE UNPAID BALANCE OF THE CONTRACT SUM.
(5) IF A CONTRACTOR OR SUBCONTRACTOR DISAPPROVES OF ALL OR A PORTION OF A SUBCONTRACTOR'S OR MATERIAL SUPPLIER'S PAYMENT REQUEST, THE CONTRACTOR OR SUBCONTRACTOR SHALL NOTIFY THE SUBCONTRACTOR OR MATERIAL SUPPLIER IN WRITING AT THE TIME THE CONTRACTOR'S OR SUBCONTRACTOR'S PAYMENT REQUEST IS MADE TO THE OWNER, THE OWNER'S REPRESENTATIVE, THE CONTRACTOR, OR THE SUBCONTRACTOR."
NEW SECTION. Section 2. Suspension of performance -- termination. (1) (a) A contractor may
suspend performance under a construction contract or terminate a construction contract for failure by
the owner to make timely payment of the amount certified and approved pursuant to 28-2-2103.
(b) A contractor shall provide written notice to the owner at least 7 calendar days before the
contractor's intended suspension or termination unless a shorter notice period is prescribed in the
construction contract between the owner and contractor.
(c) A contractor may not be considered in breach of the construction contract for suspending
performance or terminating a construction contract pursuant to this subsection (1).
(d) A construction contract may not extend the time period for a contractor to suspend performance
or terminate a construction contract under this subsection (1).
(2) (a) A subcontractor may suspend performance under a construction contract or terminate a
construction contract if the owner fails to make timely payment of amounts certified and approved
pursuant to 28-2-2103 for the subcontractor's work and if the contractor fails to pay the subcontractor
for the certified and approved work.
(b) A subcontractor shall provide written notice to the contractor and owner at least 3 calendar days
before the subcontractor's intended suspension or termination unless a shorter notice period is
prescribed in the construction contract between the contractor and subcontractor.
(c) A subcontractor may not be considered in breach of a construction contract for suspending
performance or terminating a construction contract pursuant to this subsection (2).
(d) A construction contract may not extend the time period for a subcontractor to suspend
performance or terminate a construction contract under this subsection (2).
(3) (a) A subcontractor may suspend performance under a construction contract or terminate a
construction contract if the owner makes timely payment of amounts certified and approved pursuant to
28-2-2103 for the subcontractor's work but the contractor fails to pay the subcontractor for the certified
and approved work.
(b) A subcontractor, suspending or terminating work under this subsection (3), shall provide written
notice to the contractor and owner at least 7 calendar days before the subcontractor's intended
suspension or termination unless a shorter notice period is prescribed in the construction contract
between the contractor and subcontractor.
(c) A subcontractor may not be considered in breach of a construction contract for suspending
performance or terminating a construction contract pursuant to this subsection (3).
(d) A construction contract may not extend the time period for a subcontractor to suspend
performance or terminate a construction contract under this subsection (3).
(4) (a) A subcontractor may suspend performance under a construction contract or terminate a
construction contract if the owner declines to approve and certify portions of the contractor's billing or
estimate pursuant to 28-2-2103 for that subcontractor's work if the reasons for that failure by the owner
to approve and certify are not the fault of or directly related to the subcontractor's work.
(b) A subcontractor shall provide written notice to the contractor and the owner at least 7 calendar
days before the subcontractor's intended suspension or termination unless a shorter notice period is
prescribed in the construction contract between the contractor and subcontractor.
(c) A subcontractor may not be considered in breach of a construction contract for suspending
performance or terminating a construction contract pursuant to this subsection (4).
(d) A construction contract may not extend the time period for a subcontractor to suspend
performance or terminate a construction contract under this subsection (4).
(5) A contractor or subcontractor that suspends performance, as provided in this section, is not
required to furnish further labor, materials, or services until the contractor or subcontractor is paid the
amount that was certified and approved, together with any costs incurred for mobilization and project
rescheduling resulting from the shutdown or restarting of a project.
(6) Written notice required under this section must be considered to have been provided if either of
the following occurs:
(a) the written notice is delivered in person to the individual or a member of the entity or to an
officer of the corporation for which it was intended; or
(b) the written notice is delivered to or sent by any means that provides written, third-party
verification of delivery to the last business address known to the party giving notice.
NEW SECTION. Section 2. Construction contracts -- void provisions. The following provisions
are against this state's public policy and are void and unenforceable:
(1) a A provision, covenant, clause, or understanding in, collateral to, or affecting a construction
contract that makes the contract subject to the laws of another state or that requires any litigation,
arbitration, or other dispute resolution proceeding arising from the contract to be conducted in another
state; and
(2) a provision, covenant, clause, or understanding in, collateral to, or affecting a construction
contract stating that a party to the contract cannot suspend performance under the contract or terminate
the contract if another party to the contract fails to make prompt payments under the contract pursuant
to 28-2-2103 IS AGAINST THIS STATE'S PUBLIC POLICY AND IS VOID AND
UNENFORCEABLE.
NEW SECTION. Section 3. Codification instruction. [Sections 2 and 3] are [SECTION 2] IS
intended to be codified as an integral part of Title 28, chapter 2, part 21, and the provisions of Title 28,
chapter 2, part 21, apply to [sections 2 and 3] [SECTION 2].
NEW SECTION. Section 5. Repealer. Section 28-2-2107, MCA, is repealed.
NEW SECTION. Section 4. Applicability. [This act] applies to contracts entered into after October 1, 2001.
- END -
Latest Version of HB 448 (HB0448.02)
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