Bill Text: IA SF2129 | 2011-2012 | 84th General Assembly | Introduced

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Bill Title: A bill for an act concerning the rights of parties to private and public construction contracts and including applicability provisions.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2012-02-08 - Subcommittee, Dotzler, Courtney, and Ward. S.J. 215. [SF2129 Detail]

Download: Iowa-2011-SF2129-Introduced.html

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Senate File 2129 - Introduced
SENATE FILE 2129
BY DOTZLER
A BILL FOR
An Act concerning the rights of parties to private and
public construction contracts and including applicability
provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. NEW SECTION . 573B.1 Title.
This chapter shall be known as the “Iowa Fairness in Private
Construction Contracts Act” .
Sec. 2. NEW SECTION . 573B.2 Definitions.
For the purposes of this chapter:
1. “Construction” means furnishing labor, equipment,
material, or supplies used or consumed for the design,
construction, alteration, renovation, repair, or maintenance of
a building, structure, appurtenance, or other improvement to
real property, including any moving, demolition, or excavation.
2. “Contract” means a contract or agreement concerning
construction entered into by and between an owner and
a contractor, a contractor and a subcontractor, or a
subcontractor and another subcontractor.
3. “Contractor” means a person or entity that engages in
the business of construction and has a contract with an owner
of the real property or with a trustee, agent, or spouse of an
owner.
4. “Owner” means the record titleholder or a person or
entity for whose use or benefit any construction is undertaken,
who has the capacity to contract, including a guardian.
5. “Private construction” means construction of or on
private property.
6. “Retainage” means money earned by a contractor or
subcontractor but withheld to ensure proper performance by the
contractor or subcontractor.
7. “Subcontractor” means a person or entity that engages
in the business of construction, except a person or entity
entering into a contract directly with the owner of the real
property.
Sec. 3. NEW SECTION . 573B.3 Private construction contracts
—— payment —— provisions against public policy —— failure to pay.
1. A person or entity that enters into a contract for
private construction shall make all payments pursuant to the
terms of the contract and in accordance with this chapter.
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2. The following provisions in a contract for private
construction are void and unenforceable as contrary to public
policy:
a. A provision that purports to waive, release, or
extinguish the right to resolve disputes through litigation
in court or substantive or procedural rights in connection
with such litigation. However, a contract may require
binding arbitration as a substitute for litigation or require
nonbinding alternative dispute resolution as a prerequisite to
litigation.
b. A provision that purports to waive, release, or
extinguish rights provided by chapter 660, except that a
contract may require a contractor or subcontractor to provide a
waiver or release of such rights as a condition for payment,
but only to the extent of the amount of payment received.
c. A provision that purports to waive, release, or
extinguish rights of subrogation for losses or claims covered
or paid by liability or workers’ compensation insurance unless
permitted under chapter 87 or Title XIII, subtitle 1.
3. A provision in a contract for private construction
providing that a payment from a contractor or subcontractor
to a subcontractor is contingent or conditioned upon receipt
of a payment from any other private party is no defense to a
claim to enforce a mechanic’s lien or bond to secure payment of
claims pursuant to chapter 660.
4. For a contract for private construction, if the owner
fails to pay the contractor by the date payment is due pursuant
to the contract, the owner shall pay interest to the contractor
beginning on the first business day after payment is due,
computed at the rate of eighteen percent per annum.
5. For a contract for private construction, a contractor
shall pay a subcontractor any amounts due within seven business
days of whichever of the following is later:
a. Receipt of payment by the contractor from the owner,
including payment of retainage, if retainage is released by the
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owner.
b. The date payment to the subcontractor is due pursuant to
the contract.
6. If a contractor fails to pay a subcontractor pursuant
to subsection 5, the contractor shall pay interest to the
subcontractor beginning on the first business day after payment
becomes due, computed at the rate of eighteen percent per
annum.
7. The provisions of subsections 5 and 6 shall apply to a
payment from a subcontractor to its subcontractor.
Sec. 4. NEW SECTION . 573B.4 Retainage.
1. An owner, contractor, or subcontractor may withhold
no more than ten percent retainage from the amount of any
undisputed payment due.
2. If an owner, contractor, or subcontractor fails to pay
retainage pursuant to the terms of a contract for private
construction or as required by this chapter, the owner,
contractor, or subcontractor shall pay interest to the
contractor or subcontractor to whom payment was due, beginning
on the first business day after the payment was due, at a rate
of eighteen percent per annum.
Sec. 5. NEW SECTION . 573B.5 Suspension of performance.
If any undisputed payment is not made within seven business
days after the payment date established in this chapter, the
contractor and any subcontractors may provide written notice to
the owner and, in the case of a subcontractor, written notice
to the contractor. Seven business days after the provision of
the written notice, the contractor or subcontractor, without
prejudice to any other available remedy, may suspend further
performance until payment, including applicable interest,
is made. The contract period for each contract affected by
the suspension shall be extended for a period equal to the
duration of the suspension, and the contract sum for each
affected contract shall be increased by the suspending party’s
reasonable costs of demobilization, delay, and remobilization.
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Sec. 6. NEW SECTION . 573B.6 Action or arbitration to
enforce.
In any action to enforce the provisions of this chapter,
including arbitration, the court or arbitrator shall award
costs and reasonable attorney fees to the prevailing party.
Venue of such an action shall be in the county where the
applicable real property is located. The hearing in such an
arbitration shall be held in the county where the applicable
real property is located.
Sec. 7. NEW SECTION . 573B.7 Waiver or variance prohibited.
The rights and duties prescribed by this chapter shall not be
waived or varied under the terms of a contract. The terms of a
contract waiving or varying the rights and duties prescribed by
this chapter shall be unenforceable.
Sec. 8. NEW SECTION . 573B.8 Applicability.
The provisions of this chapter do not apply to single-family
residential housing and multifamily residential housing of four
units or less. The provisions of this chapter shall not apply
to public works or public improvement projects.
Sec. 9. NEW SECTION . 573C.1 Title.
This chapter shall be known as the “Iowa Fairness in Public
Construction Contracts Act” .
Sec. 10. NEW SECTION . 573C.2 Definitions.
For the purposes of this chapter:
1. “Construction” means furnishing labor, equipment,
material, or supplies used or consumed for the design,
construction, alteration, renovation, repair, or maintenance of
a building, structure, appurtenance, or other improvement to
real property, including any moving, demolition, or excavation.
2. “Contract” means a contract or agreement concerning
construction entered into by and between an owner and
a contractor, a contractor and a subcontractor, or a
subcontractor and another subcontractor.
3. “Contractor” means a person or entity that engages in
the business of construction and has a contract with an owner
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of the real property or with a trustee, agent, or spouse of an
owner.
4. “Owner” means the record titleholder or a person or
entity for whose use or benefit any construction is undertaken,
who has the capacity to contract, including a guardian.
5. “Public construction” means construction under the
control of a public entity and paid for in whole or in part with
funds of a public entity.
6. “Public entity” means the state, an agency of the state,
or a political subdivision.
7. “Subcontractor” means a person or entity that engages
in the business of construction, except a person or entity
entering into a contract directly with the owner of the real
property.
Sec. 11. NEW SECTION . 573C.3 Public construction contracts
—— payment —— provisions against public policy —— failure to pay.
1. A person or entity that enters into a contract for public
construction shall make all payments pursuant to the terms of
the contract and in accordance with this chapter.
2. The following provisions in a contract for public
construction are void and unenforceable as contrary to public
policy:
a. A provision that purports to waive, release, or
extinguish the right to resolve disputes through litigation in
court or substantive or procedural rights in connection with
such litigation. However, a contract may require nonbinding
alternative dispute resolution as a prerequisite to litigation.
b. A provision that purports to waive, release, or
extinguish rights to file a claim against a payment or
performance bond, except that a contract may require a
contractor or subcontractor to provide a waiver or release of
such rights as a condition for payment, but only to the extent
of the amount of payment received.
c. A provision that purports to waive, release, or
extinguish rights of subrogation for losses or claims covered
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or paid by liability or workers’ compensation insurance unless
permitted under chapter 87 or Title XIII, subtitle 1.
d. A provision that purports to waive the right of a party
to collect damages for delays caused by another party.
3. For a contract for public construction, if the owner
fails to pay the contractor by the date payment is due pursuant
to the contract, the owner shall pay interest to the contractor
beginning on the first business day after payment is due,
computed at the rate of eighteen percent per annum.
4. For a contract for public construction, a contractor
shall pay a subcontractor any amounts due within seven business
days of whichever of the following is later:
a. Receipt of payment by the contractor from the owner.
b. The date payment to the subcontractor is due pursuant to
the contract.
5. If a contractor fails to pay a subcontractor pursuant
to subsection 4, the contractor shall pay interest to the
subcontractor beginning on the first business day after payment
becomes due, computed at the rate of eighteen percent per
annum.
6. The provisions of subsections 4 and 5 shall apply to a
payment from a subcontractor to its subcontractor.
Sec. 12. NEW SECTION . 573C.4 Suspension of performance.
If any undisputed payment is not made within seven business
days after the payment date established in this chapter, the
contractor and any subcontractors may provide written notice to
the owner and, in the case of a subcontractor, written notice
to the contractor. Seven business days after the provision of
the written notice, the contractor or subcontractor, without
prejudice to any other available remedy, may suspend further
performance until payment, including applicable interest,
is made. The contract period for each contract affected by
the suspension shall be extended for a period equal to the
duration of the suspension, and the contract sum for each
affected contract shall be increased by the suspending party’s
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reasonable costs of demobilization, delay, and remobilization.
Sec. 13. NEW SECTION . 573C.5 Action or arbitration to
enforce.
In any action to enforce the provisions of this chapter,
including arbitration, between a contractor and a subcontractor
or a subcontractor and a subcontractor, the court or arbitrator
shall award costs and reasonable attorney fees to the
prevailing party. Venue of such an action shall be in the
county where the applicable real property is located. The
hearing in such an arbitration shall be held in the county
where the applicable real property is located.
Sec. 14. NEW SECTION . 573C.6 Waiver or variance prohibited.
The rights and duties prescribed by this chapter shall not
be waivable or varied under the terms of a contract. The terms
of a contract waiving the rights and duties prescribed by this
chapter shall be unenforceable.
Sec. 15. NEW SECTION . 573C.7 Applicability.
This chapter does not apply to retainage or the retention
of funds as those terms are used in chapter 573. This chapter
shall not be construed to prohibit the parties to a contract
for public construction from contracting for the applicability
of the provisions of chapter 573A.
Sec. 16. APPLICABILITY. This Act applies to construction
contracts entered into on or after the effective date of this
Act.
EXPLANATION
This bill relates to the rights of parties to private and
public construction contracts.
The bill creates the “Iowa Fairness in Private Construction
Contracts Act”. The bill requires a person or entity that
enters into a contract for private construction to make
all payments pursuant to the terms of the contract and in
accordance with the bill. The bill provides that certain
provisions in a private construction contract are void and
unenforceable as contrary to public policy, including a
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S.F. 2129
provision that waives, releases, or extinguishes the right
to resolve disputes through litigation, although arbitration
may be required as a prerequisite to or a substitution for
litigation; a provision that waives, releases, or extinguishes
rights provided by Code chapter 660 relating to quo warranto
rights, although a contractor or subcontractor may be required
to waive such rights as a condition for payment, to the extent
of the amount of payment received; and a provision that waives,
releases, or extinguishes rights of subrogation for losses or
claims covered or paid by liability or workers’ compensation
insurance unless otherwise permitted under Code chapter 87
or Code Title XIII, subtitle 1, relating to regulation of
insurance.
The bill provides that a provision in a contract for
private construction making a payment from a contractor or
subcontractor to a subcontractor contingent or conditioned upon
receipt of a payment from any other private party is no defense
to a claim to enforce a mechanic’s lien or bond to secure
payment of claims pursuant to Code chapter 660.
The bill provides that for a contract for private
construction, if the owner fails to pay the contractor by the
date payment is due pursuant to the contract, the owner must
pay interest to the contractor beginning the first business day
after payment is due, at a rate of 18 percent per annum.
The bill provides that for a contract for private
construction, a contractor must pay a subcontractor any
amounts due within seven business days of the later of either
the receipt of payment by the contractor from the owner,
including retainage, if released, or the date payment to the
subcontractor is due pursuant to the subcontract. The bill
provides that if a contractor fails to pay a subcontractor in
this way, the contractor must pay interest to the subcontractor
beginning the first business day after payment is due, at a
rate of 18 percent per annum.
The bill defines “retainage” for the purposes of the “Iowa
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Fairness in Private Construction Contracts Act” as money
earned by a contractor or subcontractor but withheld to ensure
proper performance by the contractor or subcontractor. The
bill provides that an owner, contractor, or subcontractor may
withhold no more than 10 percent retainage from the amount
of any undisputed payment due. The bill provides that if an
owner, contractor, or subcontractor fails to pay retainage
as required, they must pay interest beginning on the first
business day after the payment was due, at a rate of 18 percent
per annum.
The bill provides that if an undisputed payment is not
made within seven business days after payment is due, the
contractor and any subcontractors may provide written notice
to the owner and, if payment is not made for another seven
business days, may suspend further performance until payment,
including applicable interest, is made. The bill provides
that the contract period shall be extended for a period equal
to the duration of the suspension, and the contract sum will
be increased by the suspending party’s reasonable costs of
demobilization, delay, and remobilization. The bill provides
that in any action to enforce the provisions of the bill,
including arbitration, the court or arbitrator will award costs
and reasonable attorney fees to the prevailing party. The bill
provides that such an action will take place in the county
where the applicable real property is located.
The bill provides that the rights and duties prescribed
by the bill cannot be waived or varied under the terms
of a contract, and a provision of a contract doing so is
unenforceable. The bill specifies that these provisions of
the bill do not apply to single-family residential housing and
multifamily residential housing of four units or less or public
works or public improvement projects.
The bill creates the “Iowa Fairness in Public Construction
Contracts Act”. The bill requires a person or entity that
enters into a contract for public construction to make
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all payments pursuant to the terms of the contract and in
accordance with the bill. The bill provides that certain
provisions in a public construction contract are void and
unenforceable as contrary to public policy, including a
provision that waives, releases, or extinguishes the right
to resolve disputes through litigation, although arbitration
may be required as a prerequisite to litigation; a provision
that waives, releases, or extinguishes rights to file a claim
against a payment or performance bond, although a contractor
or subcontractor may be required to waive such rights as a
condition for payment, to the extent of the amount of payment
received; a provision that waives, releases, or extinguishes
rights of subrogation for losses or claims covered or paid by
liability or workers’ compensation insurance unless otherwise
permitted under Code chapter 87 or Code Title XIII, subtitle
1, relating to regulation of insurance; and a provision that
waives the right to collect damages for delays caused by
another party.
The bill provides that for a contract for public
construction, if the owner fails to pay the contractor by the
date payment is due pursuant to the contract, the owner must
pay interest to the contractor beginning the first business day
after payment is due, at a rate of 18 percent per annum.
The bill provides that for a contract for public
construction, a contractor must pay a subcontractor any
amounts due within seven business days of the later of either
the receipt of payment by the contractor from the owner or
the date payment to the subcontractor is due pursuant to the
subcontract. The bill provides that if a contractor fails
to pay a subcontractor in this way, the contractor must pay
interest to the subcontractor beginning the first business day
after payment is due, at a rate of 18 percent per annum.
The bill provides that if an undisputed payment is not
made within seven business days after payment is due, the
contractor and any subcontractors may provide written notice
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to the owner and, if payment is not made for another seven
business days, may suspend further performance until payment,
including applicable interest, is made. The bill provides
that the contract period will be extended for a period equal
to the duration of the suspension, and the contract sum will
be increased by the suspending party’s reasonable costs of
demobilization, delay, and remobilization. The bill provides
that in any action to enforce the provisions of the bill,
including arbitration, between a contractor and a subcontractor
or a subcontractor and a subcontractor, the court or arbitrator
will award costs and reasonable attorney fees to the prevailing
party. The bill provides that such an action will take place
in the county where the applicable real property is located.
The bill provides that the rights and duties prescribed
by the bill cannot be waived or varied under the terms
of a contract, and a provision of a contract doing so is
unenforceable. The bill specifies that the provisions of the
“Iowa Fairness in Public Construction Contracts Act” do not
apply to retainage or the retention of funds as those terms are
used in Code chapter 573. The bill specifies that the bill is
not to be construed to prohibit the parties to a contract for
public construction from contracting for the applicability of
the provisions of Code chapter 573A, relating to stoppage of
public contracts in the event of an emergency.
The bill applies to construction contracts entered into on
or after the effective date of the bill.
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