In 2006, the New Jersey’s Legislature’s adoption of amendments that broadened considerably the reach of New Jersey’s Prompt Payment Law, N.J.S.A. 2A:30A-1, et seq. (“PPL”), were widely publicized.  Since then, not a single published judicial decision has addressed the PPL, and the PPL has sometimes seemed to be a forgotten weapon.  Although it remains to be seen when a published decision will raise the PPL back into the headlines, a recent unpublished trial court decision demonstrates the potency of the remedy available under the PPL.

In Aire Enterprises, Inc.v. County of Warren, Superior Court of New Jersey, Law Division, Warren County, L-151-09, a contractor who had been contracted to renovate a building owned by the defendant asserted breach of contract and PPL claims after the defendant failed to pay for the installation, at the tail end of the project, of a modular tile carpeting system.  The installation of the carpet tiles had been problematic, as 30 to 50 of the tiles located in various areas of the building had lifted within a few days of installation.  The contractor promptly repaired the tiles, and then submitted an application for payment on February 13, 2008, which was signed by the project architect.  Almost immediately thereafter, approximately 20 additional tiles lifted, and the defendant’s construction manager instructed the contractor in a letter dated March 12, 2008 to arrange for a representative of the carpet’s manufacturer to inspect the installation before any further repairs or alterations were made. 

The contractor failed to arrange a site visit by the manufacturer’s representative, and the defendant’s requests for action by the contractor grew increasingly urgent.  Finally, approximately five weeks after the construction manager’s March 12, 2008 letter, the defendant removed and replaced all of the carpet tiles that had been installed by the contractor.

Notwithstanding the contractor’s undisputed failure to arrange the site visit, the Court held that the contractor was entitled to payment, interest, and attorney’s fees under the PPL.  Under the PPL, an application for payment is deemed approved 20 days after the owner receives it, unless the owner provides a written statement to the contractor within the 20-day period stating that the owner will not be paying the bill, the amount withheld, and explaining the reasons why.  Otherwise, the owner is obligated to pay the bill within 30 days of receiving it.  Here, the owner did not provide such a written statement within 20 days of receiving the contractor’s February 13, 2008 application for payment.  Accordingly, the owner’s failure to pay violated the PPL.

The court recognized the owner’s right to assert a counterclaim for breach of contract, and found nothing in the PPL that precluded such a claim.  The court also found that the contractor breached the contract by failing to take steps to correct non-conforming work within a reasonable period.  On the issue of damages, however, the court held that it was not reasonable for the owner to remove all of the carpet tiles, when only 20 additional tiles had lifted.  Accordingly, the court held that the defendant’s damages were $150, the cost of purchasing 20 new tiles.

For New Jersey owners, the Aire case illustrates the importance of promptly addressing requests for payment for non-conforming work.  For contractors, it illustrates the importance of asserting claims under the PPL whenever possible.