Client Alerts & Publications

Differing Interpretations of New York’s Prompt Payment Act

New York’s Prompt Payment Act (PPA) (General Business Law Section 756, et. Seq.) was enacted in 2003, and has remained in its current, amended version since 2009. Yet there have been surprisingly few cases addressing its application and enforcement. It was not until 2014 that the courts issued decisions interpreting the PPA’s procedure for the review and disapproval of invoices delivered for payment on private construction projects – despite the fact that this language has been in the PPA since its inception. Unfortunately for those looking for practical advice, two of New York’s appellate courts, the First Dept. and Second Dept., have arrived at differing interpretations.

General Business Law Section 756-a(2)(a)(i) governs the procedures for a private owner’s approval or disapproval of an invoice. It states that if an owner wishes to disapprove all or a portion of an invoice, the owner must do so within 12 business days from the date the invoice is delivered by preparing and issuing a written statement describing those items disapproved.

Subparagraph (ii) of Section 756-a (2)(a) governs a contractor’s or subcontractor’s review of an invoice on a private project. A “contractor” includes a construction manager, general contractor, or others who enter into a construction contract with a private owner. Subparagraphs (i) and (ii) both require review and approval or disapproval, within 12 days of the invoice’s delivery, but subparagraph (ii) does not contain language requiring a contractor to issue a written statement in order to effectuate its disapproval.

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