Bill Text: MN SF387 | 2011-2012 | 87th Legislature | Engrossed
Bill Title: Building and construction contracts, professional services contracts, and indemnification agreements regulations
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2011-04-14 - Comm report: To pass as amended and re-refer to Judiciary and Public Safety [SF387 Detail]
Download: Minnesota-2011-SF387-Engrossed.html
1.2relating to commerce; regulating building and construction contracts and
1.3indemnification agreements;amending Minnesota Statutes 2010, sections
1.4337.01; 337.02; 337.05, subdivision 1; 337.10.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 337.01, is amended to read:
1.7337.01 BUILDING AND CONSTRUCTION CONTRACTS;
1.8INDEMNIFICATION AGREEMENTS.
1.9 Subdivision 1. Definition. As used in sections337.01 to
337.05 and 337.10, the
1.10following terms have the meanings assigned to them.
1.11 Subd. 2. Building and construction contract. "Building and construction
1.12contract" means a contract for thedesign, construction, alteration, improvement, repair
1.13or maintenance of real property, highways, roads or bridges. The term does not include
1.14contracts for the maintenance or repair of machinery, equipment or other such devices
1.15used as part of a manufacturing, converting or other production process, including
1.16electric, gas, steam, and telephone utility equipment used for production, transmission,
1.17or distribution purposes.
1.18 Subd. 3. Indemnification agreement. "Indemnification agreement" means an
1.19agreement by the promisor to indemnifyor, hold harmless, or defend the promisee against
1.20liability or claims of liability for damages arising out of bodily injury to persons or out of
1.21physical damage to tangible or real property or for economic loss.
1.22 Subd. 3a. Professional services contract. "Professional services contract" means
1.23a contract for services that are provided by a person licensed under sections 326.02
1.24to 326.15.
2.1 Subd. 4. Promisee. "Promisee" includes that party's independent contractors,
2.2agents, employees or indemnitees.
2.3 Sec. 2. Minnesota Statutes 2010, section 337.02, is amended to read:
2.4337.02 UNENFORCEABILITY OF CERTAIN AGREEMENTS.
2.5An indemnification agreement contained in, or executed in connection with, a
2.6professional services contract or a building and construction contract is unenforceable
2.7except to the extent that: (1) the underlying injury or damage is attributable to the
2.8negligent or otherwise wrongful act or omission, including breach of a specific contractual
2.9duty, of the promisor or the promisor's independent contractors, agents, employees,
2.10or delegatees; or (2) an owner, a responsible party, or a governmental entity agrees to
2.11indemnify a contractor directly or through another contractor with respect to strict liability
2.12under environmental laws.
2.13 Sec. 3. Minnesota Statutes 2010, section 337.05, subdivision 1, is amended to read:
2.14 Subdivision 1. Agreements valid. Sections337.01 to
337.05 do not affect the
2.15validity ofagreements building and construction contracts and professional services
2.16contracts whereby a promisor agrees to provide specific insurance coverage for the benefit
2.17of others, except that a promise to provide professional liability insurance for the benefit
2.18of others shall not be enforceable.
2.19 Sec. 4. Minnesota Statutes 2010, section 337.10, is amended to read:
2.20337.10 BUILDING AND CONSTRUCTION CONTRACTS; PROHIBITED
2.21PROVISIONS.
2.22 Subdivision 1. Application of laws of another state. Provisions contained in,
2.23or executed in connection with, a building and construction contract or a professional
2.24services contract to be performed in Minnesota making the contract subject to the laws of
2.25another state or requiring that any litigation, arbitration, or other dispute resolution process
2.26on the contract occur in another state are void and unenforceable.
2.27 Subd. 2. Waiver of lien or claim. Provisions contained in, or executed in connection
2.28with, a building and construction contract or a professional services contract requiring a
2.29contractor, subcontractor, or material supplier to waive the right to a mechanics lien or to a
2.30claim against a payment bond before the person has been paid for the labor or materials or
2.31both that the person furnished are void and unenforceable. This provision shall not affect
2.32the validity of a waiver as to any third party who detrimentally relies upon the waiver.
3.1 Subd. 3. Prompt payment to subcontractors. A building and construction contract
3.2or a professional services contract shall be deemed to require the prime contractor and all
3.3subcontractors to promptly pay any subcontractor or material supplier contract within ten
3.4days of receipt by the party responsible for payment of payment for undisputed services
3.5provided by the party requesting payment. The contract shall be deemed to require the
3.6party responsible for payment to pay interest of 1-1/2 percent per month to the party
3.7requesting payment on any undisputed amount not paid on time. The minimum monthly
3.8interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid
3.9balance of less than $100, the party responsible for payment shall pay the actual penalty
3.10due to the party requesting payment. A party requesting payment who prevails in a civil
3.11action to collect interest penalties from a party responsible for payment must be awarded
3.12its costs and disbursements, including attorney fees incurred in bringing the action.
3.13 Subd. 4. Progress payments and retainages. (a) Unless the building and
3.14construction contract provides otherwise, the owner or other persons making payments
3.15under the contract must make progress payments monthly as the work progresses.
3.16Payments shall be based upon estimates of work completed as approved by the owner or
3.17the owner's agent. A progress payment shall not be considered acceptance or approval of
3.18any work or waiver of any defects therein.
3.19(b) Unless the building and construction contract provides otherwise, an owner or
3.20owner's agent may reserve as retainage from any progress payment on a building and
3.21construction contract an amount not to exceed five percent of the payment. An owner or
3.22owner's agent may reduce the amount of retainage and may eliminate retainage on any
3.23monthly contract payment if, in the owner's opinion, the work is progressing satisfactorily.
3.24(c) This subdivision does not apply to contracts for professional services as defined
3.25in sections326.02 to
326.15 .
3.26 Subd. 5. Definition. For the purpose of this section, "building and construction
3.27contract"has and "professional services contract" have the meaning meanings given the
3.28term in section
337.01 .
3.29 Sec. 5. EFFECTIVE DATE; APPLICATION.
3.30Sections 1 to 4 are effective August 1, 2011, and apply to contracts and agreements
3.31entered into on or after that date.
1.3indemnification agreements;amending Minnesota Statutes 2010, sections
1.4337.01; 337.02; 337.05, subdivision 1; 337.10.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2010, section 337.01, is amended to read:
1.7337.01 BUILDING AND CONSTRUCTION CONTRACTS;
1.8INDEMNIFICATION AGREEMENTS.
1.9 Subdivision 1. Definition. As used in sections
1.10following terms have the meanings assigned to them.
1.11 Subd. 2. Building and construction contract. "Building and construction
1.12contract" means a contract for the
1.13or maintenance of real property, highways, roads or bridges. The term does not include
1.14contracts for the maintenance or repair of machinery, equipment or other such devices
1.15used as part of a manufacturing, converting or other production process, including
1.16electric, gas, steam, and telephone utility equipment used for production, transmission,
1.17or distribution purposes.
1.18 Subd. 3. Indemnification agreement. "Indemnification agreement" means an
1.19agreement by the promisor to indemnify
1.20liability or claims of liability for damages arising out of bodily injury to persons or out of
1.21physical damage to tangible or real property or for economic loss.
1.22 Subd. 3a. Professional services contract. "Professional services contract" means
1.23a contract for services that are provided by a person licensed under sections 326.02
1.24to 326.15.
2.1 Subd. 4. Promisee. "Promisee" includes that party's independent contractors,
2.2agents, employees or indemnitees.
2.3 Sec. 2. Minnesota Statutes 2010, section 337.02, is amended to read:
2.4337.02 UNENFORCEABILITY OF CERTAIN AGREEMENTS.
2.5An indemnification agreement contained in, or executed in connection with, a
2.6professional services contract or a building and construction contract is unenforceable
2.7except to the extent that: (1) the underlying injury or damage is attributable to the
2.8negligent or otherwise wrongful act or omission, including breach of a specific contractual
2.9duty, of the promisor or the promisor's independent contractors, agents, employees,
2.10or delegatees; or (2) an owner, a responsible party, or a governmental entity agrees to
2.11indemnify a contractor directly or through another contractor with respect to strict liability
2.12under environmental laws.
2.13 Sec. 3. Minnesota Statutes 2010, section 337.05, subdivision 1, is amended to read:
2.14 Subdivision 1. Agreements valid. Sections
2.15validity of
2.16contracts whereby a promisor agrees to provide specific insurance coverage for the benefit
2.17of others, except that a promise to provide professional liability insurance for the benefit
2.18of others shall not be enforceable.
2.19 Sec. 4. Minnesota Statutes 2010, section 337.10, is amended to read:
2.20337.10 BUILDING AND CONSTRUCTION CONTRACTS; PROHIBITED
2.21PROVISIONS.
2.22 Subdivision 1. Application of laws of another state. Provisions contained in,
2.23or executed in connection with, a building and construction contract or a professional
2.24services contract to be performed in Minnesota making the contract subject to the laws of
2.25another state or requiring that any litigation, arbitration, or other dispute resolution process
2.26on the contract occur in another state are void and unenforceable.
2.27 Subd. 2. Waiver of lien or claim. Provisions contained in, or executed in connection
2.28with, a building and construction contract or a professional services contract requiring a
2.29contractor, subcontractor, or material supplier to waive the right to a mechanics lien or to a
2.30claim against a payment bond before the person has been paid for the labor or materials or
2.31both that the person furnished are void and unenforceable. This provision shall not affect
2.32the validity of a waiver as to any third party who detrimentally relies upon the waiver.
3.1 Subd. 3. Prompt payment to subcontractors. A building and construction contract
3.2or a professional services contract shall be deemed to require the prime contractor and all
3.3subcontractors to promptly pay any subcontractor or material supplier contract within ten
3.4days of receipt by the party responsible for payment of payment for undisputed services
3.5provided by the party requesting payment. The contract shall be deemed to require the
3.6party responsible for payment to pay interest of 1-1/2 percent per month to the party
3.7requesting payment on any undisputed amount not paid on time. The minimum monthly
3.8interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid
3.9balance of less than $100, the party responsible for payment shall pay the actual penalty
3.10due to the party requesting payment. A party requesting payment who prevails in a civil
3.11action to collect interest penalties from a party responsible for payment must be awarded
3.12its costs and disbursements, including attorney fees incurred in bringing the action.
3.13 Subd. 4. Progress payments and retainages. (a) Unless the building and
3.14construction contract provides otherwise, the owner or other persons making payments
3.15under the contract must make progress payments monthly as the work progresses.
3.16Payments shall be based upon estimates of work completed as approved by the owner or
3.17the owner's agent. A progress payment shall not be considered acceptance or approval of
3.18any work or waiver of any defects therein.
3.19(b) Unless the building and construction contract provides otherwise, an owner or
3.20owner's agent may reserve as retainage from any progress payment on a building and
3.21construction contract an amount not to exceed five percent of the payment. An owner or
3.22owner's agent may reduce the amount of retainage and may eliminate retainage on any
3.23monthly contract payment if, in the owner's opinion, the work is progressing satisfactorily.
3.24(c) This subdivision does not apply to contracts for professional services as defined
3.25in sections
3.26 Subd. 5. Definition. For the purpose of this section, "building and construction
3.27contract"
3.28
3.29 Sec. 5. EFFECTIVE DATE; APPLICATION.
3.30Sections 1 to 4 are effective August 1, 2011, and apply to contracts and agreements
3.31entered into on or after that date.
