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New Jersey 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, New Jersey has certain rules that govern what the agreement must include — and what is prohibited.

Keep in mind that, while New Jersey’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 New Jersey’s construction contract and payment terms requirements.

New Jersey construction contract provisions

While New Jersey 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

No-lien clauses or any other similar provisions that attempt to waive a contractor’s lien rights in their contract are strictly prohibited in New Jersey as against public policy.

Contingent payment clauses
Both pay-if-paid and pay-when-paid clauses in New Jersey are enforceable in construction contracts. However, to have an enforceable pay-if-paid clause, the language must clearly and unambiguously shift the risk of nonpayment to the subcontractor. If the clause fails to include such language, then it will be treated as a pay-when-paid clause, which merely sets a reasonable time for payment.

Payment timing clauses

In New Jersey, the same set of prompt payment provisions apply to both private and public projects. The timing of such payments may be modified by contract between the parties. According to NJ’s prompt pay requirements, payments from the owner/public entity to the general contractor are to be made according to the billing cycle contained within the terms of the contract. Furthermore, all other payments to subs and/or suppliers are required to be made within 10 days of receipt of payment. But this timing may also be modified by the contract between the parties.

Retainage limits

On private projects, the amount of retainage that may be withheld is not regulated by New Jersey law. Thus, the amount that can be withheld, and how long it can be withheld will be governed by the terms of the contract.

Conversely, on NJ public works projects, the amount withheld cannot exceed 2% of each progress payment. When the public works project reaches substantial completion, not more than 1% may be withheld from the remainder of each payment.

New Jersey home improvement contract requirements

New Jersey home improvement contracts are regulated by a number of different statutory provisions. Generally, any home improvement contract in excess of $500 must be in writing, signed by both parties, and include the contractor’s registration number, a copy of the certificate of commercial general liability insurance, the total contract price, a description of the work and materials, start and completion dates, description of any mortgage or security interest in connection with the financing of the improvement, and any guarantee or warranty of the work or materials.

The contract should also contain two notices in 10pt bold-face font; a Notice to Consumer regarding the 3-day right to cancel, and the other stating the Contractor Registration Act and the toll-free number to contact the NJ Division of Consumer Affairs (which must be in all caps), found under NJAC §13;45A-17.11.

Furthermore, if the contract provides for payments over a period of 90 days or more, in addition to the above-mentioned requirements, the contract must also include a Notice to Owner in 10pt bold-face font, and a statement that worker’s comp and public general liability insurance is carried.

New Jersey Construction Contracts FAQs

Can you waive lien rights by contract in New Jersey?

No, New Jersey prohibits the use of “no-lien clauses” in a construction contract. This is explicitly mentioned under N.J. Stat. §2A:44A-38:

Waivers of construction lien rights are against public policy, unlawful, and void, unless given in consideration for payment for the work, services, materials or equipment provided or to be provided, and such waivers shall be effective only upon and to the extent that such payment is actually received.

Do I need a written contract to file a New Jersey mechanics lien?

Yes, under New Jersey’s lien laws a written contract is required in order to assert a NJ mechanics lien claim. A contract is specifically defined as “any agreement, or amendment thereto, in writing.”  (Emphasis added)

• Learn more: Can a Contractor File a Mechanics Lien Without a Written Contract?

How does New Jersey treat pay-if-paid and pay-when-paid clauses?

There are two types of contingent payment clauses, pay-if-paid clauses and pay-when-paid clauses; both of which are enforceable in New Jersey.

Pay-if-paid clauses

A pay-if-paid clause is enforceable and shifts the risk of nonpayment from the contractor to the subcontractor if the language unambiguously shifts the risk of non-payment to the subcontractor. (OA Peterson Construction v. Englewood Hospital) However, even if a valid pay-if-paid clause is present on a private project, a construction lien may still be filed against the property.

Pay-when-paid clauses

In New Jersey, pay-when-paid clauses are also enforceable, but the clause will be interpreted to require payment within a reasonable time, regardless of whether the owner has paid. (Seal Tite Corp. v. Ehret, Inc.)

Are no-damages-for-delays clauses enforceable in New Jersey?

The enforceability of no-damages-for-delay clauses in New Jersey depends on the type of project.

Private projects

On private projects, such clauses are generally enforceable, with some limitations. New Jersey courts have recognized that such clauses will not bar the recovery of delay damages if the delay:

• Was of a type not contemplated by the parties;
• Amounts to the abandonment of the contract or project; or
• Was caused by the active interference or bad faith by the party seeking to enforce the claim.

Public projects

However, on public projects, these clauses are specifically prohibited as against public policy under NJ Stat. §2A:58B-3, which states that any agreement “purporting to limit a contractor’s remedy for delayed performance caused by the public entity’s negligence, bad faith, active interference, or other tortious conduct to an extension of time for performance under the contract, is against public policy and is void and unenforceable.”

Can you contract around New Jersey’s prompt payment terms?

The New Jersey prompt payment provisions govern both private and public projects in the same manner.

Payments from the property owner or contracting entity become due according to the billing cycle provided in the contract. The payments must be released within 30 days of the specified due date.

All other payments to subcontractors and suppliers must be made within 10 days of receipt of payment. However, this time period may be modified by the terms of the contract.

Can you contract around New Jersey's retainage requirements?

Private projects

New Jersey does not regulate the amount of retainage that may be withheld on private construction projects. Thus, the amount withheld and the timing of its release will be governed by the terms of the contract.

Public projects

On most public works projects in New Jersey, the amount of retainage that can be withheld is no more than 2% of each progress payment, until the project reaches substantial completion. At that point, no more than 1% may be withheld until the project’s full completion. This cannot be modified or exceeded by the terms of the contract.

Does New Jersey have any specific requirements for construction contracts?

There are no specific requirements for construction contracts in general. However, there are a number of different requirements for home improvement or repair contracts.

First and foremost, all home improvement valued at over $500 must be in writing, signed by both parties, and contain the following: name and address of all parties to the contract, the contractor’s registration number, a description of the work and materials to be provided, the total contract price, the start and completion dates, a certificate of the contractor’s general commercial liability insurance, a description of any mortgage or security interest connected to the financing of the project, and any guarantees or warranties of the work or materials provided. The contract must also include the two notices in at least 10pt, bold-face type:

Notice to Consumer: informing them of their 3-day right to cancel the contract
Contractor Registration Notice: informing them of the registration act and the toll-free number of the NJ Division of Consumer Affairs

Also, if the contract provides for payments over a period of 90 days or more, in addition to the requirements listed above, the contract must also include a statement of worker’s compensation and public liability insurance coverage, or identify if the contractor is qualified as a self-insurer, and contain the following notice in 10pt bold-face type:

Notice to Owner

Do not sign this contract in blank.

You are entitled to a copy of the contract at the time you sign.

Keep it to protect your legal rights.

Do not sign any completion certificate or agreement stating that you are satisfied with the entire project before this project is complete. Home repair contractors are prohibited by law from requesting or accepting a certificate of completion signed by the owner prior to the actual completion of the work to be performed under the home repair contract.

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

The statute of limitations (deadline) to file a breach of contract claim for nonpayment is 6 years from the date of the breach, regardless of whether the contract was oral or written, under NJ Stat. §2A:14-1.

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