Georgia Construction Contracts Guide & FAQs

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Georgia Construction Contracts Overview

Georgia Construction Contracts


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A construction contract outlines each party’s obligations, rights, and remedies on a project. But although the language in specific contract clauses is typically negotiable, Georgia has certain rules that govern what the agreement must include — and what is prohibited.

Keep in mind that, while Georgia’s rules for construction contract terms are written into state law, the courts determine how strictly those laws should be interpreted — and those interpretations can change.

On this page, you’ll find resources, legal information, and answers to frequently asked questions about Georgia’s construction contract and payment terms requirements.

Georgia construction contract provisions

While Georgia generally allows construction parties to set the terms of their agreement, there are some laws that regulate specific types of contract provisions. Any contract clause that contradicts the law is invalid and unenforceable.

“No lien” clauses

Georgia’s mechanics lien law specifically prohibits the use of “no-lien clauses.” Any term in a construction contract that attempts to waive or impair a party’s claims or liens in advance of performance, shall be void and unenforceable.

Contingent payment clauses
There are two types of contingent payment clauses: pay-if-paid and pay-when-paid, and Georgia essentially treats these as the same.

Georgia specifically allows parties on private projects to modify their rights to payment and shift the risk of nonpayment through pay-when-paid and pay-if-paid provisions. In Georgia, if the wording is specific and clear, a pay-when-paid clause stating that payment will be made only when payment is received from above can effectively bar payment forever. This was discussed in the case United States ex rel. McKenney’s, Inc. v. Gov’t Tech. Servs., LLC, 531 F. Supp. 2d 1375, 1378 (N.D. Ga. 2008), among others.

The effectiveness of such risk-shifting provisions is less clear and potentially subject to some more legal nit-picking on public projects in Georgia, but best practice would be to treat them as effective. It is likely that pay-when-paid and pay-if-paid clauses would be enforceable on public projects in Georgia to the same extent as private projects.

Payment timing clauses

Georgia’s prompt payment statutes apply to both private and public projects. Payments by the owner or public entity (where applicable) are due to the prime contractor within 15 days of receipt of an invoice or payment request. Once payment is received, subcontractors and suppliers must be paid within 10 days. If payment is late, the amount will accrue interest at a rate of 1% per month. However, the parties may modify both the timing of payments and the amount of interest that will accrue for late payment under the terms of the contract.

• See: Georgia’s Prompt Pay Act | What Contractors Need to Know

Retainage limits

The amount of retainage that can be withheld on private projects is unregulated in Georgia. Therefore the terms of the contract will govern how much retainage may be withheld from each progress payment. On public projects, the amount of retainage is strictly capped at 10% of each progress payment until the contractor reached 50% satisfactory completion. If so, then no more retainage should be withheld for the remaining progress and final payments.

• See: Guide to Retainage on Georgia Public & Private Projects

Georgia construction contract requirements

Georgia doesn’t have any specific, statutory requirements for construction contracts. Generally, there are always certain provisions that should be included in a contract, such as a price, schedule, the scope of work, etc.

• See: A Guide to Common Construction Contract Parts

However, there are some specific requirements for certain residential projects. On projects concerning 1-2 family residential projects, the prime contractor must provide a written warranty listing the details of work covered, exemptions, claim procedures, and more as required by the GA Board of Residential & General Contractors. Additionally, construction contracts involving any buildings intended to be used for residential purposes must also contain specific notice language informing the consumer of the construction defect notice and opportunity to repair process.

Construction Contracts FAQs in Georgia

Construction contracts and payment terms are highly regulated in Georgia. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with construction contracts and payment terms on Georgia jobs

Georgia Construction Contracts FAQs

Can you waive lien rights by contract in Georgia?

No, Georgia’s mechanics lien statute expressly prohibits the use of so-called “no-lien clauses” under OCGA §44-14-366(b):

A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services, or materials. Any purported waiver or release of lien or bond claim or of this Code section executed or made in advance of furnishing of labor, services, or materials is null, void, and unenforceable.

For more on this, see: Our contract has a waiver of lien rights clause, what can I do? (Georgia)

Do I need a written contract to be able to file a Georgia mechanics lien?

No, there is no specific requirement that a claimant needs a written contract in order to have the ability to file a Georgia mechanics lien. Although it’s always recommended to get the agreement in writing.

• See: Property lien with no written contract in GA

How does Georgia treat pay-if-paid and pay-when-paid clauses?

Georgia allows both pay-if-paid and pay-when-paid clauses to be conditions precedent to payment – to effectively bar payment forever and shift the risk of nonpayment to the lower-tier contracting party – if the clauses are sufficiently explicit. Essentially treating such clauses as the same, making no distinction between the two.Contract language stating that payment will be made only when payment is received from above to effectively bar payment forever. When the clauses are clear, the risk of nonpayment can be shifted on private projects. –US ex rel McKenney’s Inc. v. Gov’t Tech

This is a bit more muddied on public projects, while it seems that explicit risk-shifting clauses could work as conditions precedent to payment, there are some tricky determinations made by some courts. A Georgia case drew a distinction between whether the existence of the debt itself was conditional, or whether the debt existed and merely the payment was conditional. If the latter, the court did not allow payment to be withheld indefinitely. This seems to suggest that there is the possibility, depending on how a risk-shifting contract clause was written that a Georgia court could determine that a clause that didn’t explicitly specify that the existence of the debt itself is conditioned upon payment being received above, to work as a timing mechanism for a payment that must ultimately be made.

• For more information, see: Georgia Pay-if-Paid Clauses are Enforceable

Are no-damages-for-delays clauses enforceable in Georgia?

Yes, a no-damages-for-delay clause is enforceable in Georgia as long as they are clear and unambiguous. However, the Georgia courts have carved out some exceptions to the enforceability of these clauses, such as delays that:

    • Were not contemplated by the parties;
    • Caused by the other party’s bad faith or willful, malicious, or grossly negligent conduct;
    • Are so unreasonable, that it constitutes an intentional abandonment of the contract; or
    • Results from the contractee’s breach of a fundamental obligation of the contract.

Can you contract around Georgia’s prompt payment terms?

Yes, the timing and interest penalties may be modified by the agreement between the parties in Georgia.

The same Georgia prompt payment laws apply to both private and public contracts. Under these provisions, the property owner or public entity must release payment to the prime contractor within 15 days of receipt of an invoice or pay application. Once received, all other payments must be made down the payment chain within 10 days of receipt of payments from the higher tier. Lastly, any late payments will accrue interest at a rate of 1% per month.

However, OCGA §13-11-7(b) explicitly states that:

Nothing in this chapter shall prohibit owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated in this Code section, and in this event, these contractual provisions shall control.

Can you contract around Georgia's retainage requirements?

Private projects

Yes. Although Georgia does have laws governing the ability to withhold retainage and the timing of its release, there is no statutory limit on the amount of retainage that can be withheld on private projects. Only that the amount withheld should be a “reasonable amount.” Therefore, the amount of retainage that can be withheld will be dictated by the terms of the agreement.

Public projects

Conversely, the amount of retainage that can be withheld on Georgia public works projects is strictly capped at no more than 10% of each progress payment. If the contractor is making satisfactory progress at the 50% completion mark, then no more retainage should be withheld from the remaining progress payments. The terms of the contract cannot increase the amount beyond 10%.

• For a full breakdown, see: Georgia Guide to Retainage on Public & Private Construction Projects

Does Georgia have any specific requirements for construction contracts?

Generally speaking, there is nothing explicitly required to be included in a construction contract in Georgia. However, if the project is for the construction, repair, or improvement of certain types of residential projects, there are some requirements regarding warranties and a notice language regarding alleged construction defects.

Writtten warranty requirement

On all 1-2 family, residential projects valued over $2,500, the prime contractor must provide a copy of this written warranty attached to the contract, or separately. Under Ga. Comp. R. & Regs. §553-1-.01, the warranty should describe, at minimum:

    • Covered work & actviities;
    • Covered exclusions;
    • Standards for evaluating work & activities (set forth in the Residential Construction Performance Guideliens published by the NAHB);
    • Term of warranty, including commencement date(s) or events;
    • Claim procedures;
    • Contractor response options (such as repair, replace, or compensate); &
    • Assignable manufacturer warranties.

Failure to provide this written warranty can subject the contractor to fines and/or penalties from the Board for Residential and General Contractors.

Right to repair notice

This notice language regarding construction defects is required under OCGA §8-2-41, and should be included in any construction contract related to single-family house, duplex, or multifamily unit designed for residential use in which title to each individual residential unit is transferred to the owner under a condominium or cooperative system; or provided separately. The notice must be conspicuous and read as follows:

GEORGIA LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT OR OTHER ACTION FOR DEFECTIVE CONSTRUCTION AGAINST THE CONTRACTOR WHO CONSTRUCTED, IMPROVED, OR REPAIRED YOUR HOME. NINETY DAYS BEFORE YOU FILE YOUR LAWSUIT OR OTHER ACTION, YOU MUST SERVE ON THE CONTRACTOR A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE. UNDER THE LAW, A CONTRACTOR HAS THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS OR BOTH. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY A CONTRACTOR. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT OR OTHER ACTION.

How long do I have to bring a breach of contract claim for nonpayment in Georgia?

The statute of limitations (deadline) to file a breach of contract claim for nonpayment in Georgia varies depending on if the contract was written or oral.

• An action for breach of a written contract must be brought within 6 years from the date of the breach. –OCGA §9-3-24

• Actions for a breach of an oral contract must be brought within 4 years from the date of the breach. –OCGA §9-3-26

 

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