Bill Text: OR SB384 | 2011 | Regular Session | Enrolled
Bill Title: Relating to prompt payment provisions for private construction contracts.
Spectrum: Unknown
Status: (Passed) 2011-06-30 - Effective date, January 1, 2012. [SB384 Detail]
Download: Oregon-2011-SB384-Enrolled.html
76th OREGON LEGISLATIVE ASSEMBLY--2011 Regular Session
Enrolled
Senate Bill 384
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Senate Interim Committee on
Judiciary for Oregon State Bar Construction Law Section)
CHAPTER ................
AN ACT
Relating to prompt payment provisions for private construction
contracts; creating new provisions; and amending ORS 701.620,
701.625, 701.630, 701.635 and 701.640.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 701.620 is amended to read:
701.620. As used in ORS 701.620 to 701.640:
(1) 'Construction contract' means a written or oral
construction agreement, including all { - plans, - }
{ + drawings, + } specifications and addenda relating to:
(a) Excavating, landscaping, demolishing and detaching existing
structures, leveling, filling in and other preparation of land
for the making and placement of a building, structure or
superstructure;
(b) Creation or making of a building, structure or
superstructure; and
(c) Alteration, partial construction and repairs done in and
upon a building, structure or superstructure.
(2) 'Contractor' has the meaning given that term in ORS 87.005.
(3) 'Days' means calendar days.
(4) 'Material supplier' means any person providing materials or
products under a construction contract by { - any contractual
means including - } oral authorization, written contract,
purchase order, price agreement { + , + } { - or - } rental
agreement { + or other contractual means + }.
(5) 'Original contractor' has the meaning given that term in
ORS 87.005.
(6) 'Owner' has the meaning given that term in ORS 701.410.
(7) 'Subcontractor' has the meaning given that term in ORS
87.005.
SECTION 2. ORS 701.625 is amended to read:
701.625. { - (1) By mutual agreement with an original
contractor, an owner may make progress payments to the original
contractor on a construction contract that is anticipated to last
less than 60 days. An owner shall make progress payments to the
original contractor on all other construction contracts. Progress
payments shall be made on the basis of a certified billing or
estimate for the work performed and the materials or products
supplied during the preceding 30-day billing cycle, or an
Enrolled Senate Bill 384 (SB 384-B) Page 1
alternate billing cycle as stated in the construction contract.
If billings or estimates are to be submitted in alternate, rather
than 30-day billing cycles, the construction contract shall
specify the alternate billing cycles in a clear and conspicuous
manner as prescribed in subsection (2) of this section. Except as
provided in subsection (3) of this section, the owner shall make
progress payments to the original contractor within 14 days after
the date the billing is submitted pursuant to subsection (4) of
this section. - }
{ + (1) If a construction contract is for construction work
that is expected to take 60 or more days to complete, an owner
shall make progress payments to the original contractor. By
mutual agreement with an original contractor, an owner may make
progress payments to the original contractor under a construction
contract for which the construction work is expected to take less
than 60 days to complete. + }
(2) { - A construction contract may provide for an alternate
billing cycle if the plans and specifications specifically set
forth - } { + The owner shall make progress payments on the
basis of a certified billing or estimate for work performed, and
for materials or products supplied, during the preceding monthly
billing cycle or during an alternative billing cycle identified
in the construction contract. If a construction contract
identifies an alternative billing cycle, the construction
contract must expressly state in a clear and conspicuous
manner + } that there is an
{ - alternate - } { + alternative + } billing cycle and the
owner { - provides for - } { + must provide on + } each page
of { - plans - } { + drawings + } and specifications { + in
the construction contract + } a statement substantially similar
to the following { - statement - } :
_________________________________________________________________
Notice of { -
Alternate - } { + Alternative + } Billing Cycle
The { + construction + } contract will allow the owner to
require the submission of billings or estimates in billing cycles
other than
{ - 30-day - } { + monthly + } cycles. Billings or estimates
for the { + construction + } contract shall be submitted as
follows:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_________________________________________________________________
(3) { + (a) Except as provided in this subsection, the owner
shall:
(A) Make progress payments no later than 14 days after the date
the billing is received; and
(B) Make final payment of all remaining amounts no later than
seven days after the date that the owner approves the work.
(b) + }An owner may make progress payments { + or final
payment + } later than { - 14 days after the date the billing
or estimate is submitted - } { + the time allowed under
paragraph (a) of this subsection + } if:
Enrolled Senate Bill 384 (SB 384-B) Page 2
{ - (a) - } { + (A) + } The owner { - is responsible for
providing plans - } { + provides drawings + } and
specifications that expressly { - allow - } { + state + } in
a clear and conspicuous manner { + that + }an extended payment
{ - , defined by a specified - } { + period is allowed and
identify the extended payment period as a specific + }number of
days after { + the date that + } the billing or estimate is
{ - submitted - } { + received or the date that the owner
approves all work + }; and
{ - (b) - } { + (B) + } The owner provides { - for - }
{ + on + } each page of { - plans - } { + drawings + } and
specifications a statement substantially similar to the following
{ - statement - } :
_________________________________________________________________
Notice of Extended Payment Provision
The { + construction + } contract will allow the owner to make
{ - payment within - } { + :
1) Progress payments no later than + } ___ days after the date
a billing or estimate is { - submitted - } { + received + }.
{ + 2) Final payment of all remaining amounts no later than
_____ days after the date the owner approves all work. + }
_________________________________________________________________
{ + (4) Payment is not required under this section unless the
owner receives from the original contractor a billing or estimate
for the work performed or the materials or products supplied in
accordance with the terms of the construction contract. + }
{ - (4) - } { + (5) + } The owner is deemed to have
received the billing or estimate when the billing or estimate is
{ - submitted to - } { + received by + } any person designated
by the owner for the receipt, review or approval of the billing
or estimate. A billing or estimate is deemed to be certified 10
days after the owner receives the billing or estimate, unless
before that time the owner or the owner's agent prepares and
issues a written statement detailing those items in the billing
or estimate that are not approved. An owner may decline to
approve a billing or estimate or portion of a billing or estimate
{ - for - } { + because of + }:
(a) Unsatisfactory work progress;
(b) Defective construction work, materials or products not
remedied;
(c) Disputed work, materials or products, { + except that the
declined amount may + } not { - to - } exceed 150 percent of
the amount in dispute;
(d) Failure to comply with other material provisions of the
construction contract;
(e) { + A + } third party { - claims - } { + claim being
+ }filed or reasonable evidence that { - such - } a
{ + third party + } claim will be filed;
(f) Failure of the original contractor or a subcontractor to
make timely payments to subcontractors and material suppliers for
labor, equipment, materials and products;
(g) Damage to the owner;
(h) Reasonable evidence that the construction contract cannot
be completed for the unpaid balance of the construction contract
sum; or
(i) Other items as allowed under the { + construction + }
contract terms and conditions.
Enrolled Senate Bill 384 (SB 384-B) Page 3
{ - (5) An owner may withhold from a progress payment an
amount that is sufficient to pay the direct expenses the owner
reasonably expects to incur to correct any items set forth in
writing pursuant to subsection (4) of this section. The owner may
also withhold a reasonable amount as retainage as defined in ORS
701.410. - }
(6) An owner may extend the period within which the billing or
estimate may be certified if:
(a) The owner { - is responsible for providing plans - }
{ + provides drawings + } and specifications that expressly
allow in a clear and conspicuous manner an extended period within
which a billing or estimate may be certified; and
(b) The owner provides for each page of { - plans - } { +
drawings + } and specifications, including bid { - plans and
construction plans, - } { + drawings and specifications and
construction drawings and specifications, + } a statement
substantially similar to the following statement:
_________________________________________________________________
Notice of
Extended Certification Period Provision
The { + construction + } contract will allow the owner to
certify billings and estimates { - within - } { + no later
than + } ___ days after the billings and estimates are received
from the original contractor.
_________________________________________________________________
{ + (7) Any requirement under this section that a statement
be provided on a page of drawings or specifications may be
satisfied by placing the required statement on either side of the
page. + }
{ - (7) - } { + (8) + } After a subcontractor or material
supplier submits a bid or proposal or other written pricing
information to an original contractor, an owner and the original
contractor may { + agree in writing to + } change the specified
number of days after certification during which the owner may
make payment to the original contractor or within which the owner
must certify a billing or estimate. { + The billings by + } any
{ - original contractor, - } subcontractor or material supplier
that does not provide written consent to the change { - will
continue to be paid as - } { + remain subject to the
certification period + } indicated in the { - plans - } { +
drawings + } and specifications. { + A construction contract may
not be changed in a manner that alters the right of any
subcontractor or material supplier to receive prompt and timely
progress payments as provided under ORS 701.630.
(9) An owner may withhold from a progress payment an amount
that is sufficient to pay the direct expenses the owner
reasonably expects to incur to correct any items detailed in a
written statement under subsection (5) of this section. The owner
may also withhold a reasonable amount as retainage. As used in
this subsection, 'retainage' has the meaning given that term in
ORS 701.410. + }
{ - (8) - } { + (10) + } When an original contractor
completes and an owner approves all work under a construction
contract, the owner shall make payment in full of all remaining
amounts due on the construction contract { - within seven
days - } { + as described in subsection (3) of this
section + }. When an original contractor completes and an owner
Enrolled Senate Bill 384 (SB 384-B) Page 4
approves all work under a portion of a construction contract for
which the { + construction + } contract states a separate price,
the owner shall make payment in full of all remaining amounts due
on that portion of the construction contract, subject to the
satisfaction of any { - issue described in - } { + items
detailed under + } subsection { - (4) - } { + (5) + } of this
section or ORS 701.630 (4).
{ - (9) Payment is not required under this section unless the
original contractor provides the owner with a billing or estimate
for the work performed or the materials or products supplied in
accordance with the terms of the construction contract between
the parties. - }
{ - (10) A construction contract may not alter the right of
any original contractor, subcontractor or material supplier to
receive prompt and timely progress payments as provided under
this section. - }
(11) If an owner or a person designated by the owner as
responsible for making progress payments on a construction
contract does not make a timely payment under this section, the
owner shall pay the original contractor interest on the unpaid
balance at the rate of one and one-half percent a month or
fraction of a month, or at a higher rate as the parties to the
construction contract may agree.
(12) On the written request of a subcontractor, the owner shall
notify the subcontractor { - within - } { + no later than + }
five days after the issuance of a progress payment to the
original contractor. On the written request of a subcontractor,
the owner shall notify the subcontractor { - within - } { +
no later than + } five days after the owner makes the final
payment to the original contractor on the construction contract.
{ - (13) In any action, claim or arbitration brought to
collect payments or interest pursuant to this section, the
prevailing party shall be awarded reasonable costs and attorney
fees. - }
{ - (14) - } { + (13) + } If the owner and original
contractor are a single entity, that entity shall { - pay - }
{ + make progress and final payments to + } subcontractors and
material suppliers { - within 14 days after the billing or
estimate is received unless the deadlines for certification or
payment have been modified pursuant to - } { + as described in
+ }subsection (3) or (6) of this section.
{ + (14) In any action, claim or arbitration brought to
collect interest pursuant to this section, the prevailing party
shall be awarded costs and reasonable attorney fees. + }
SECTION 3. ORS 701.630 is amended to read:
701.630. (1) { - Performance by - } An original contractor,
subcontractor or material supplier { - in accordance with the
provisions of a construction contract entitles the original
contractor, subcontractor or material supplier - } { + that
performs in accordance with a construction contract is entitled
+ }to payment from the party with whom the original contractor,
subcontractor or material supplier contracts.
{ - (2) If a subcontractor or material supplier has performed
in accordance with the provisions of a construction contract, the
original contractor shall pay to the subcontractor or material
supplier, and each subcontractor shall pay to its subcontractors
or material suppliers, the full amount received for such
subcontractor's work and for materials and products supplied
based on the subcontract or purchase order terms and conditions
Enrolled Senate Bill 384 (SB 384-B) Page 5
within seven days of receipt by the original contractor or
subcontractor of a progress payment or final payment. - }
{ + (2)(a) If a subcontractor has performed in accordance
with a construction contract, and the original contractor
receives payment from the owner for work performed by the
subcontractor, the original contractor shall pay the
subcontractor for that work no later than seven days after the
original contractor receives the payment. If a material supplier
has performed in accordance with a construction contract, and the
original contractor receives payment from the owner for materials
or products provided by the material supplier, the original
contractor shall pay the material supplier for those materials
and products no later than seven days after the original
contractor receives the payment. An original subcontractor that
receives payment under this subsection for work provided to the
original subcontractor by another subcontractor, or for materials
or products provided to the original subcontractor, shall pay the
other subcontractor or material supplier for the work, materials
or products no later than seven days after the original
subcontractor receives the payment.
(b) + } Payment is not required under this subsection unless a
subcontractor or material supplier provides to the original
contractor or subcontractor a billing or invoice for the work
performed or materials or products supplied in compliance with
the terms of the contract between the parties. Each subcontractor
or material supplier must provide an appropriate waiver of any
{ - mechanic's or materialman's - } lien { + for labor,
equipment, services, materials or products + } in accordance with
subcontract or purchase order terms and conditions. The original
contractor or subcontractor may require that such waivers of lien
be notarized.
(3) Any failure to reasonably account for the application or
use of payments, as proven in a legal proceeding authorized under
the terms of the construction contract, may constitute grounds
for disciplinary action by the Construction Contractors Board
under ORS 701.098.
(4) { - Nothing in this section prevents - } An original
contractor
{ - when submitting a bill - } { + that submits a billing
+ }or estimate to an owner, or { - a - } { + an original + }
subcontractor { - when submitting a bill - } { + that submits
a billing + }or estimate to the original contractor,
{ - from omitting from the bill - } { + may omit from the
billing or + } estimate amounts { + to be + } withheld from
payment to a subcontractor or material supplier { - for - }
{ + because of + }:
(a) Unsatisfactory work progress;
(b) Defective construction work, materials or products not
remedied;
(c) Disputed work, materials or products, { + except that the
withheld amount may + }not { - to - } exceed 150 percent of
the amount in dispute;
(d) Failure to comply with other material provisions of the
construction contract;
(e) { + A + } third party { - claims - } { + claim
being + } filed or reasonable evidence that { - such - } a
{ + third party + } claim will be filed;
(f) Failure of the subcontractor to make timely payments to
subcontractors and material suppliers for labor, equipment,
materials and products;
Enrolled Senate Bill 384 (SB 384-B) Page 6
(g) Damage to an original contractor, subcontractor or material
supplier;
(h) Reasonable evidence that the subcontract cannot be
completed for the unpaid balance of the subcontract sum; { +
or + }
{ - (i) A reasonable amount for retainage, as defined in ORS
701.410, that does not exceed the actual percentage allowed by
the subcontract or purchase order; or - }
{ - (j) - } { + (i) + } Other items as allowed under the
subcontract or purchase order terms and conditions.
{ + (5) An original contractor or original subcontractor may
also omit from a billing or estimate a reasonable amount for
retainage, except that the amount omitted may not exceed the
actual percentage allowed by the construction contract,
subcontract or purchase order. As used in this subsection,
'retainage' has the meaning given that term in ORS 701.410. + }
{ - (5) - } { + (6) + } If a progress or final payment to a
subcontractor or material supplier is delayed by more than seven
days after receipt of a progress or final payment by an original
contractor or subcontractor, the original contractor or
subcontractor shall pay its subcontractor or material supplier
interest beginning on the eighth day, except during periods of
time during which payment is withheld pursuant to subsection
(4) { + or (5) + } of this section, at the rate of one and
one-half percent a month or a fraction of a month on the unpaid
balance or at such higher rate as the parties agree.
{ - (6) - } { + (7) + } In any action, claim or arbitration
brought to collect { - payments or - } interest under this
section, the prevailing party shall be awarded
{ - reasonable - } costs and { + reasonable + } attorney fees.
SECTION 4. ORS 701.635 is amended to read:
701.635. (1) An original contractor may suspend performance
under a construction contract, or { + if performance is
suspended for longer than one month may + }terminate a
construction contract { + , + } if
{ - performance is suspended for longer than 30 days, for
failure by - } the owner { + fails + } to make timely payment of
the amount certified under ORS 701.625. An original contractor
shall provide written notice to an owner at least seven days
before the original contractor suspends performance or terminates
the { + construction + } contract, unless a shorter notice
period is prescribed in the { + construction + } contract. An
original contractor may not be deemed in breach of a construction
contract for suspending performance or terminating a construction
contract pursuant to this subsection. A construction contract may
not extend the notice period under this subsection.
(2) A subcontractor may suspend performance under a
construction contract, or { + if performance is suspended for
longer than one month may + }terminate a construction
contract { + , + } if
{ - performance is suspended for longer than 30 days, for
failure by - } the owner { + fails + } to make timely payment of
amounts certified under ORS 701.625 or the subcontractor
{ - fails to - } { + does not + } receive payment for the
certified work under ORS 701.630 (2). A subcontractor shall
provide written notice to the original contractor and owner at
least three days before the subcontractor suspends performance or
terminates the { + construction + } contract, unless a shorter
notice period is prescribed in the { + construction + }
contract. A subcontractor may not be deemed in breach of a
Enrolled Senate Bill 384 (SB 384-B) Page 7
construction contract for suspending performance or terminating a
{ + construction + } contract pursuant to this subsection. A
construction contract may not extend the notice period under this
subsection.
(3) A subcontractor may suspend performance under a
construction contract, or { + if performance is suspended for
longer than one month may + }terminate a construction
contract { + , + } { - if performance is suspended for longer
than 30 days, - } if the owner makes timely payment of amounts
certified under ORS 701.625 for the subcontractor's work but the
original contractor fails to pay the subcontractor for the
certified work. A subcontractor shall provide written notice to
the original contractor and owner at least seven days before the
subcontractor suspends performance or terminates the
{ + construction + } contract, unless a shorter notice period is
prescribed in the { + construction + } contract. A subcontractor
may not be deemed in breach of a construction contract for
suspending performance or terminating a { + construction + }
contract pursuant to this subsection. A construction contract may
not extend the notice period under this subsection.
(4) A subcontractor may suspend performance under a
construction contract, or { + if performance is suspended for
longer than one month may + }terminate a construction
contract { + , + } { - if performance is suspended for longer
than 30 days, - } if the owner { + declines or + } fails { +
+ }to approve portions of the contractor's billing or estimate
under ORS 701.625 for that subcontractor's work { - but - }
{ + and + } the reasons for { - that failure - } { +
nonapproval + } are not the fault of or directly related to the
subcontractor's work. A subcontractor shall provide written
notice to the original contractor and the owner at least seven
days before the subcontractor suspends performance or terminates
the { + construction + } contract, unless a shorter notice
period is prescribed in the { + construction + } contract. A
subcontractor may not be deemed in breach of a construction
contract for suspending performance or terminating a
{ + construction + } contract pursuant to this subsection. A
construction contract may not extend the notice period under this
subsection.
(5) A contractor or subcontractor may not submit a notice of
suspension under this section until the lawful period for payment
to the contractor or subcontractor has expired.
(6) An original contractor or subcontractor that suspends
performance as provided in this section { - is not required to
furnish further labor, materials, products or services until the
original contractor or subcontractor is paid the amount that was
certified under ORS 701.625, together with - } { + may
condition the supplying of further labor, equipment, services,
materials or products upon the owner or original contractor
paying, in addition to any amounts certified under ORS 701.625,
+ }any documented, substantial and reasonably incurred costs for
mobilization resulting from the shutdown or start-up of a
project.
(7) In any action, claim or arbitration brought pursuant to
this section, the prevailing party shall be awarded
{ - reasonable - } costs and { + reasonable + } attorney fees.
(8) Written notice required under this section is deemed to
have been provided if the notice:
Enrolled Senate Bill 384 (SB 384-B) Page 8
(a) Is delivered in person to the owner, original contractor,
subcontractor or a person designated by the owner, original
contractor or subcontractor to receive notice; or
(b) Is delivered by certified mail, return receipt requested,
or other means that provides written, third party verification of
delivery to the last business address of the owner, original
contractor or subcontractor known to the party giving notice.
SECTION 5. ORS 701.640 is amended to read:
701.640. (1) A construction contract may not include any
provision, covenant or clause that:
(a) Makes the { + construction + } contract subject to the
laws of another state or that requires any litigation,
arbitration or other dispute resolution proceeding arising from
the { + construction + } contract to be conducted in another
state; or
(b) States that a party to the { + construction + } contract
cannot suspend performance under the { + construction
+ }contract or terminate the { + construction + } contract if
another party to the { + construction + } contract fails to make
prompt payments under the { + construction + } contract pursuant
to ORS 701.620 to 701.640.
(2) Any provision, covenant or clause described in subsection
(1) of this section is void and unenforceable.
SECTION 6. { + The amendments to ORS 701.620, 701.625,
701.630, 701.635 and 701.640 by sections 1 to 5 of this 2011 Act
apply to construction contracts that an owner enters into on or
after the effective date of this 2011 Act. + }
----------
Passed by Senate March 31, 2011
Repassed by Senate June 16, 2011
.............................................................
Robert Taylor, Secretary of Senate
.............................................................
Peter Courtney, President of Senate
Passed by House June 13, 2011
.............................................................
Bruce Hanna, Speaker of House
.............................................................
Arnie Roblan, Speaker of House
Enrolled Senate Bill 384 (SB 384-B) Page 9
Received by Governor:
......M.,............., 2011
Approved:
......M.,............., 2011
.............................................................
John Kitzhaber, Governor
Filed in Office of Secretary of State:
......M.,............., 2011
.............................................................
Kate Brown, Secretary of State
Enrolled Senate Bill 384 (SB 384-B) Page 10
