When a New Jersey public authority failed to comply with the NJ Prompt Pay Act,[1] it was obligated to pay the contractor even though it argued the contractor’s work was defective. That was the decision of the NJ Appellate Division in the case of Aire Enterprises v. Warren County.[2] After the county’s architect approved the contractor’s final requisition, the county’s failure to nullify the architect’s action or issue a timely written notice rejecting the requisition meant that payment was due.

The $300,000 contract included laying about 400 carpet tiles. It is not clear from the decision, but the tiles may have been purchased by the county, and not by the contractor. About “thirty to fifty” tiles began lifting from the floor within a month after installation. The contractor performed remedial work, and issued a final requisition for $12,250. Twenty days later, the architect certified the final requisition for payment. The county never paid, nor did it issue any written notice to the contractor. However, when additional carpet tiles began to lift, the county decided to replace all of the carpet tile.

The NJ prompt pay act provides that a requisition is “deemed approved” 20 days after the owner receives it unless the owner provides, within that period, “a written statement of the amount withheld and the reason for withholding payment.” The appellate court held that when the county failed to provide this written notice, the contractor – by virtue of the prompt pay act – was entitled to the final payment notwithstanding the county’s argument of defective work. This is one more warning that courts will enforce statutory payment mechanisms.

Two side notes of interest. First, on the county’s counterclaim for replacing the carpet tile, the court found that only 20 additional tiles were lifting, and so the county’s damages were the cost of those 20 tiles, or $150. Second, the contractor’s counsel sought $180,896 in counsel fees and costs (‼); the court awarded only $44,056 – which is still high relative to the $12,250 in dispute.