New Jersey Prompt Payment Act - Don’t Forget the Written Requirement

For more than fifteen years, New Jersey’s Prompt Payment Act has been a powerful tool for contractors and subcontractors to recover monies. One key provision of the Prompt Payment Act that is often overlooked, however, is the written objection requirement contained in N.J.S.A. 2A:30A-2(a). Under this provision, billings are deemed approved and certified twenty days after receipt by the owner unless the owner provides, within the same twenty-day period, a written statement of the amount and the reason for the withholding.

The New Jersey Appellate Division recently analyzed the importance of complying with the written statement requirement. In Coarc Co. Electrical Contractors v. Sanzari Asphalt Maintenance, LLC,¹ plaintiff had performed electrical work on multiple construction projects. The plaintiff sent numerous invoices to the defendant, but the defendant did not communicate in writing any objection to the invoices within twenty days of their receipt. There were, however, conversations between the parties about defendant’s dispute over the invoices. After defendant failed to remit payment, plaintiff filed suit alleging breach of contract and seeking an award of attorneys’ fees and interest under the Prompt Payment Act.

The trial court granted relief in favor of plaintiff for amounts due. The court denied an award of attorneys’ fees under the Prompt Payment Act, concluding that the plaintiff was aware, through conversations between the parties, that there was a dispute over amounts in the plaintiff’s invoice. On appeal, the Appellate Division noted that defendant did not object in writing to the invoices within twenty days of their receipt. The Appellate Division held that there is no flexibility in this requirement and discussions do not qualify as a substitute. As such, the court reversed the denial of attorneys’ fees.

The decision in Coarc Co. Electrical Contractors has two important takeaways. First, the written statement requirement must be strictly complied with. Second, verbal conversations are not an exception and have no evidentiary value for establishing compliance with the written statement requirement. The decisions in Coarc Co. Electrical Contractors, and JHC Indus. Servs., LLC v. Centurion Cos., Inc.,² demonstrate the consequences parties may face for failing to promptly pay contractors or comply with the Prompt Payment Act.

¹Coarc Co. Electrical Contractors v. Sanzari Asphalt Maintenance, LLC, 2022 N.J. Super. Unpub. LEXIS 810, 2022 WL 1529446 (App. Div. May 16, 2022)

²JHC Indus. Servs., LLC v. Centurion Cos., Inc., 469 N.J. Super. 306 (App. Div. 2021)