Delaware Prompt Payment Requirements
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For Prime Contractors, progress payment must be made within 30 days from invoice, or the end of the billing period.
For Subcontractors, payment must be made within 15 days of payment being received from above, unless otherwise agreed in contract.
For Suppliers, payment must be made within 15 days of payment being received from above, unless otherwise agreed in contract.
Interest & Fees
Interest at 5% over the federal reserve rate. Attorneys' fees can be awarded to the prevailing party. Potential for other damages relating to amounts withheld "wrongfully". All of the above can be modified by contract betweeen the parties.
For Prime (General) Contractors, progress payments due according to contract if the contract is to be completed in less than 90 days. For longer contracts, progress payemnts due monthly within 21 days of the date on which the progress work has been certifed and approved. Final/retainage payment due within 60 days of acceptance of the work.
Payment due within 21 days of payment received from above. Can be modified by contract.
Interest & Fees
Interest at a rate not more than prime plus 2%.
Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.
Projects Covered by Prompt Payment in Delaware
The state of Delaware regulates prompt payment on both private and public construction projects.
Payment on private construction projects in Delaware are governed by Del. Code. Title 6, §§3501 et seq. and §2301. These regulations apply to all private construction projects except residential projects of 6 or fewer units.
Payment Deadlines for Private Projects
Payments from the property owner to prime contractors must be made within 30 days of either the receipt of a request for payment, or the end of the billing period; whichever is later. Once the contractor has received payment, they must in turn pay their subcontractors or suppliers within 15 days. However, the parties can agree to different payment terms in the contract. If any party disputes the amount stated in a request for payment, they must notify the other party within 7 days of receipt of the request.
Penalties for Late Payment on Private Projects
Any payments that are late or wrongfully withheld, will be subject to interest accruing at a rate equal to the Federal Reserve Discount Rate plus 5% a year, which will be compounded monthly. Meaning at the end of each delinquent month the interest accrued will be added to the principal and begin accruing interest on the increased amount the following month. If the dispute goes to court or arbitration, the prevailing party will be awarded costs and attorney fees. Also, the unpaid party may be awarded additional damages for any amounts that were wrongfully withheld.
Delaware has a separate set of statutes that regulate public works projects, which are found in Del. Code Title 29, §6516(f).
Payment Deadlines for Public Projects
On projects of less than 90 days, progress payments will be governed by the terms of the contract. For all other public works projects, progress payment must be made from the public entity to the prime contractor within 21 days after approval of the payment request. Approvals must be made within 7 days of receipt of the request. However, if federal agency approval is required on the project, progress payments will be due within 10 days of the federal agency approval. Final payments to the prime contractor are due within 60 days of completion and acceptance of the project.
As for all other payments to subcontractors and suppliers, payment must be made within 21 days of the higher-tiered party’s receipt of payment. This 21-day period may be modified by the contract terms between the parties.
Penalties for Late Payment on Public Projects
The prompt pay statutes specify certain reasons when payment can be rightfully withheld. However, any payments that are late or wrongfully withheld, will accrue interest penalties. The rates can be provided for in the contract, but cannot exceed the Federal prime interest rate plus 2%. Additionally, the unpaid party may be awarded additional damages for amounts that are wrongfully withheld.