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SECOND REGULAR SESSION
HOUSE COMMITTEE SUBSTITUTE FOR
HOUSE BILL NO. 1915
103RD GENERAL ASSEMBL Y
5457H.05C JOSEPH ENGLER, Chief Clerk
AN ACT
T o repeal sections 431.180, 436.300, and 436.303, RSMo, and to enact in lieu thereof two
new sections relating to construction contracts.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Sections 431.180, 436.300, and 436.303, RSMo, are repealed and two new
2 sections enacted in lieu thereof, to be known as sections 436.300 and 436.303, to read as
3 follows:
436.300. 1. As used in sections 436.300 to 436.336, the following terms mean:
2 (1) "Construction", furnishing labor , equipment, material, or supplies used,
3 leased, or consumed for the design, construction, alteration, ren ovation, repa ir , or
4 maintenance of a building, structur e, access, ro ad, bridge, all utilities' lines including,
5 but not limited to, water lines, sewer lines, oil lines, gas lines, and fiber optic lines,
6 appurtenance or other improv ement to r eal pro perty including any moving, demolition,
7 design, or excavation;
8 (2) "Contract", a contract or agr eement concerning construction made and
9 enter ed into by and between an owner and a contractor , a contractor and a
10 subcontractor , or a subcontractor and another subcontractor;
11 (3) "Contractor", a person performing construction and having a contract with
12 an owner or tenant of the rea l pr operty;
13 (4) "Owner", any person or entity holding a reco rd ownership or beneficial
14 inter est in r eal prope rty at the time any contractor , subcontractor or materialman
15 agr ees or is reque sted to furnish any work, labor , material, fixtur e, engine, boiler , or
16 machinery , who contracts for improv ements or knowingly permits a third party to
17 contract for impro vements, on the real prop erty;
EXPLANA TION — Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is
intended to be omitted from the law . Matter in bold-face type in the above bill is proposed language.
18 (5) "Residential r eal pr operty":
19 (a) Shall include:
20 a. Any par cel of real estate impro ved or unimpr oved that is intended to be used
21 or is used for the construction of r esidential structur es and rela ted improv ements which
22 support the res idential use of the land wher e such r esidential structur es ar e intended,
23 upon completion, to be occupied or sold. Such res idential structur es shall include any
24 r esidential dwelling consisting of sixteen units or less, including condominiums,
25 townhouses, or cooperatives; and
26 b. Any impr ovements including street s, sidewalks, utility services, impro ved
27 common ar eas, or other facilities which are constructed within the defined re sidential
28 use structure s or located on or within any common gr ound, common elements, or the
29 separate and identifiable par cels identified for res idential use;
30 (b) Shall not include:
31 a. Any mixed use or planned unit developments except to the extent that any
32 r esidential uses of such developments are, or will be, located on separate, identifiable
33 par cels fro m the nonr esidential uses and only apply to those r esidential uses; or
34 b. Multifamily rent al, student housing or dormitories, or assisted living, skilled
35 nursing, or similar facilities;
36 (6) "Subcontractor", any person of every tier performing construction cover ed
37 by a contract between an owner and a contractor but not having a contract with the
38 owner;
39 (7) "Substantial completion", the same meaning as used in section 436.327.
40 2. For the purposes of sections 436.300 to 436.336, design or construction work
41 shall include design, construction, alteration, r epair , or maintenance of any building,
42 r oadway , or other structur e or improvement to re al pr operty , or demolition or
43 excavation connected ther ewith, and shall include the furnishing of surveying,
44 ar chitectural, engineering or landscape design, planning or management services,
45 labor or materials, in connection with such work.
46 3. Notwithstanding any other law to the contrary , all parties to any contract or
47 agreement for private construction work that is between any owner and any contractor , or
48 between any contractor and any subcontractor , or between any subcontractor and any sub-
49 subcontractor , or any supplier at whatever tier for construction, reconstruction, maintenance,
50 alteration, or repair for a private owner of any building, improvement, structure, private road,
51 appurtenance, or appliance, including moving, demolition, or any excavating connected
52 therewith, shall make payment in accordance with the terms of such contract or agreement,
53 provided such terms are not inconsistent with the provisions of sections 436.300 to 436.336.
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54 4. (1) An owner shall make pr ogress payments to the contractor and any
55 pr ofessional engineer , arch itect, landscape ar chitect, or land surveyor on at least a
56 monthly basis, or on a milestone basis as the work progr esses, or on a lump sum basis
57 according to the terms of the lump sum contract. Except in the case of lump sum and
58 milestone contracts, payments shall be based upon estimates pre pared at least monthly
59 of work performed and material deliver ed or pur chased and stor ed for the project per
60 the requi rem ents of the contract documents. Retainage withheld on any construction
61 contract or subcontract for private construction pr ojects shall comply with the
62 r equir ements set forth in section 436.303.
63 (2) Payments shall be consider ed receiv ed within the context of this section when
64 the funds ar e:
65 (a) Physically deliver ed;
66 (b) Posted at the post office or mailed by register ed mail;
67 (c) Mailed by certified mail with r eturn receipt requ ested or a certificate of
68 mailing; or
69 (d) Electr onically transferr ed.
70 (3) If in the discr etion of the owner and when applicable under the contract, the
71 pr oject arch itect or engineer , and the contractor , it is determined that a subcontractor's
72 performance has been completed and the subcontractor can be re leased prior to
73 substantial completion of the contract without risk to the owner , the contractor shall
74 r equest such adjustment in ret ainage, if any , fr om the owner as necessary to enable the
75 contractor to pay the subcontractor in full. The owner may redu ce or eliminate
76 r etainage on any contract payment if in the owner's opinion the work is pr oceeding
77 satisfactorily . The contractor shall have no obligation to relea se ret ainage to a
78 subcontractor unless and until the contractor has recei ved correspon ding ret ainage
79 fr om the owner for that subcontractor's work. If ret ainage is rele ased and ther e ar e any
80 r emaining minor items to be completed, an amount equal to one hundr ed fifty per cent of
81 the value of each item as determined by the owner's duly authorized rep rese ntatives
82 shall be withheld until such item or items ar e completed.
83 (4) Upon substantial completion, owner shall pay at least ninety-eight per cent of
84 the r etainage, less any offsets or deductions authorized in the contract or otherwise
85 authorized by law , to the contractor . The contractor shall pay the subcontractor or
86 supplier after substantial completion of the contract work and acceptance by the
87 owner's authorized contract repr esentative. Such payment shall be made within thirty
88 days after acceptance and the invoice and all other appr opriate documentation and
89 certifications in complete and acceptable form ar e pr ovided, as may be requ ired by the
90 contract documents. If the owner or the owner's repr esentative determines the work is
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91 not substantially completed and accepted, the owner or the owner's rep rese ntative shall
92 pr ovide a written explanation of why the work is not consider ed substantially completed
93 and accepted within fourteen calendar days to the contractor , who shall then provi de
94 such notice to the subcontractor or suppliers r esponsible for such work. If such written
95 explanation is not given by the owner , the owner shall pay at least ninety-eight per cent
96 of the ret ainage within thirty calendar days. If at that time ther e are any rem aining
97 minor items to be completed, an amount equal to one hundr ed fifty percen t of the value
98 of each item as determined by the owner or owner's rep rese ntative shall be withheld
99 until such items are completed.
100 (5) All estimates or invoices for supplies and services pur chased, appr oved, and
101 pr ocessed, or final payments, shall be paid pro mptly and shall be subject to late
102 payment charges as pro vided in this section. Except as provi ded in subdivision 4 of this
103 section, if the contractor has not been paid within thirty days as set forth in this section,
104 the owner shall pay the contractor , in addition to the payment due to the contractor ,
105 inter est at the rate of one and one half per cent per month calculated fr om the expiration
106 of the thirty-day period until fully paid. Any person who has not been paid may bring
107 an action in a court of competent jurisdiction against a person who has failed to pay .
108 The court may , in addition to any other award for damages, award interes t at the rate of
109 up to one and one-half percent per month fr om the date payment was due under the
110 terms of the contract and reas onable attorney's fees to the prevai ling party . If the
111 parties elect to res olve the dispute by arbitration under section 435.350, or the
112 corr esponding provi sions of the Federal Arbitration Act, the arbitrator may award any
113 r emedy that a court is authorized to award hereu nder .
114 (6) Wi thin two business days after payment from the owner to the contractor , for
115 one or mor e subcontractors' work, the owner shall notify each subcontractor in writing
116 or electr onically . When a contractor re ceives any payment, the contractor shall pay
117 each subcontractor and material supplier in pro portion to the work completed by each
118 subcontractor and material supplier their application less any r etainage as set forth in
119 section 436.303. If the contractor rec eives less than the full payment due under the
120 construction contract, the contractor shall be obligated to disburse on a pr o rata basis
121 those funds r eceived, with the contractor , subcontractors, and material suppliers each
122 r eceiving a prora ted portion based on the amount of payment. When, however , the
123 owner does not re lease the full payment due under the contract because ther e are
124 specific area s of work or materials the owner is rej ecting or because the owner has
125 otherwise determined such are as are not suitable for payment, those specific
1 2 6 subcontractors or suppliers involved shall not be paid for that portion of the work
127 r ejected or deemed not suitable for payment, pr ovided the owner , or the owner's
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128 r epresent ative, gives a written explanation to the contractor , subcontractor , or supplier
129 involved as to why the work or supplies wer e rej ected or deemed not suitable for
130 payment, and all other subcontractors and suppliers shall be paid in full.
131 (7) If the contractor , without reas onable cause, fails to make any payment to his
132 or her subcontractors and material suppliers within fifteen days after rec eipt of
133 payment under the construction contract, the contractor shall pay to his or her
134 subcontractors and material suppliers, in addition to the payment due to them, inter est
135 in the amount of one and one-half per cent per month, calculated fr om the expiration of
136 the fifteen-day period until fully paid. This subdivision shall also apply to any payments
137 made by subcontractors and material suppliers to their subcontractors and material
138 suppliers and to all payments made to lower -tier subcontractors and material suppliers
139 thr oughout the contracting chain.
140 (8) The owner shall make final payment of all moneys owed to the contractor ,
141 including any ret ainage withheld under sub division (4) of this subsection, less any
142 offsets or deductions authorized in the contract or otherwise authorized by law , within
143 thirty days of the due date. Final payment shall be considered due upon the earliest of
144 the following events:
145 (a) Completion of the pr oject and filing with the owner of all r equir ed
146 documentation and certifications, in complete and acceptable form, in accordance with
147 the terms and conditions of the contract; or
148 (b) The pro ject reach es substantial completion as defined under section 436.327.
149 5. Nothing in this section shall prev ent the contractor or subcontractor , at the
150 time of application or certification to the owner or contractor , fr om withholding such
151 applications or certifications to the owner or contractor for payment to the
1 5 2 subcontractor or material supplier . Amounts intended to be withheld shall not be
153 included in such applications or certifications to the owner or contractor . Reasons for
154 withholding such applications or certifications shall include, but not be limited to, the
155 following:
156 (1) Unsatisfactory job prog ress;
157 (2) Defective construction work or material not rem edied;
158 (3) Disputed work;
159 (4) Failur e to comply with other material pr ovisions of the contract or other
160 specific contractual condition to payment;
161 (5) Third-party claims filed or rea sonable evidence that a claim will be filed;
162 (6) Failur e of the subcontractor to make timely payments for labor , equipment,
163 and materials;
164 (7) Damage to a contractor or another subcontractor or material supplier; or
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165 (8) Reasonable evidence that the contract cannot be completed for the unpaid
166 balance of the subcontract sum or a r easonable amount for ret ention, not to exceed the
167 initial percen tage ret ained by the owner .
168 6. Should the contractor determine, after application or certification has been
169 made and after payment has been recei ved fr om the owner , or after payment has been
170 r eceived by a contractor based upon the owner's estimate of materials in place and work
171 performed as provi ded by contract, that all or a portion of the moneys needs to be
172 withheld fr om a specific subcontractor or material supplier for any of the reas ons
173 enumerated in this section, and such moneys ar e withheld fr om such subcontractor or
174 material supplier , such undistributed amounts shall be specifically identified in writing
175 and deducted fr om the next application or certification made to the owner or fr om the
176 next estimate by the owner of payment due to the contractor until a res olution of the
177 matter has been achieved. Disputes shall be res olved in accordance with the terms of
178 the contract documents. Upon such res olution the amounts withheld by the contractor
179 fr om the subcontractor or material supplier shall be included in the next application or
180 certification made to the owner or the next estimate by the owner and shall be paid
181 pr omptly in accordance with the prov isions of this section. This subsection shall also
182 apply to applications or certifications made by subcontractors or material suppliers to
183 the contractor and thr oughout the various tiers of the contracting chain.
184 7. For contracts that pr ovide for payments to the contractor based upon the
185 owner's estimate of materials in place and work performed rather than applications or
186 certifications submitted by the contractor , the owner shall pay the contractor within
187 thirty days following the date upon which the estimate is r equir ed by contract to be
188 completed by the owner , the amount due less a ret ainage as set forth in section 436.303.
189 All such estimates by the owner shall be paid pr omptly and shall be subject to late
190 payment charges as pr ovided in this subsection. After the thirtieth day following the
191 date upon which the estimate is requ ired by contract to be completed by the owner , the
192 owner shall pay the contractor , in addition to the payment due to the contractor , inter est
193 at a rate of one and one-half percen t per month calculated fr om the expiration of the
194 thirty-day period until fully paid.
195 8. The owner shall pay or cause to be paid to any pro fessional engineer ,
196 ar chitect, landscape archi tect, or land surveyor the amount due within thirty days
197 following the r eceipt of an invoice prep ared and submitted in accordance with the
198 contract terms. In addition to the payment due, the owner shall pay interes t at the rate
199 of one and one-half per cent per month calculated fr om the expiration of the thirty-day
200 period until fully paid.
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201 9. Nothing in this section shall pre vent the owner fr om withholding payment or
202 final payment from the contractor or a subcontractor or material supplier . Reasons for
203 withholding payment or final payment shall include, but not be limited to:
204 (1) Liquidated damages;
205 (2) Unsatisfactory job prog ress;
206 (3) Defective construction work or material not rem edied;
207 (4) Disputed work;
208 (5) Failur e to comply with any material pr ovision of the contract or other
209 specific contractual condition for payment;
210 (6) Third-party claims filed or rea sonable evidence that a claim will be filed;
211 (7) Failure to make timely payments for labor , equipment, or materials;
212 (8) Damage to a contractor , subcontractor , or material supplier;
213 (9) Reasonable evidence that a subcontractor or material supplier cannot be
214 fully compensated under its contract with the contractor for the unpaid balance of the
215 contract sum; or
216 (10) Citation by the enfor cing authority for acts of the contractor or
217 subcontractor that do not comply with any material pr ovision of the contract and
218 that r esult in a violation of any federal, state, or local law , regul ation, or ordinance
219 applicable to that pro ject causing additional costs or damages to the owner .
220 10. In addition to contractor's rights under subsection 5 of this section,
221 subcontractors, whether or not specifically requi red in the contract, specifically grant
222 the contractor the right to hold futur e payments until lien waivers are pr ovided and
223 until the contractor recei ves confirmation of account status fr om any of the parties
224 pr eviously noted. The contractor shall have the right to rem edy unpaid balances
225 associated with the subcontractors' obligations thr ough all legal means noted in the
226 contract including, but not limited to, issuing joint checks between the subcontractor
227 and third party vendors. In the event that the contractor is requ ired to issue a payment
228 in the form of a joint check, a pro cessing fee shall be charged to the subcontractor not
229 exceeding two hundred fifty dollars and withheld fr om futur e payments.
230 1 1. Nothing in this section shall be construed to requi re dir ect payment by an
231 owner to a subcontractor or supplier .
232 12. Notwithstanding any other pro visions in this section to the contrary , no late
233 payment interes t shall be due and owing for payments that ar e withheld in good faith
234 for re asonable cause under subsections 6, 9, and 10 of this section. If it is determined by
235 a court of competent jurisdiction that a payment that was withheld under subsections 6,
236 9, and 10 of this section was not withheld in good faith for reas onable cause, the court
237 may impose interes t at the rate of one and one-half per cent per month calculated fr om
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238 the date of the invoice and may , in its discre tion, award reas onable attorney's fees to the
239 pr evailing party . In any civil action or part of a civil action brou ght under this section,
240 if a court determines after a hearing for such purpose that the cause was initiated, or a
241 defense was asserted, or a motion was filed, or any pro ceeding ther ein was done
242 frivolously and in bad faith, the court shall requ ire the party who initiated such cause,
243 asserted such defense, filed such motion, or caused such pr oceeding to be had to pay the
244 other party named in such action the amount of the costs attributable ther eto and
245 r easonable expenses incurr ed by such party , including r easonable attorney's fees.
246 13. Nothing in this section shall be construed to pr event any person who has not
247 been paid in accordance with this section fr om bringing an action in a court of
248 competent jurisdiction against a person who has failed to pay .
249 14. The pr ovisions of this section shall not apply to construction contracts for
250 work on r esidential real pro perty .
436.303. A contract or agreement for private design or construction work may
2 include a provision for the retainage of a portion of any payment due from the owner to the
3 contractor , not to exceed ten percent of the amount of such payment due pursuant to the
4 contract or agreement, to ensure the proper performance of the contract or agreement,
5 provided that the contract may provide that if the contractor's performance is not in
6 accordance with the terms of the contract or agreement, the owner may retain additional sums
7 to protect the owner's interest in satisfactory performance of the contract or agreement.
8 Ther e shall be no reta inage if the contractor and each subcontractor at any tier are
9 bonded for both payment and performance. The amount or amounts so retained by the
10 owner shall be referred to in sections 436.300 to 436.336 as "retainage", and shall be held by
11 the owner in trust for the benefit of the contractor and contractor's subcontractors, sub-
12 subcontractors, and suppliers at whatever tier who are not in default, in proportion to their
13 respective interests. Such retainage shall be subject to the conditions and limitations listed in
14 sections 436.300 to 436.336.
[ 431.180 . 1. All persons who enter into a contract for private design
2 or construction work after August 28, 1995, shall make all scheduled
3 payments pursuant to the terms of the contract.
4 2. Any person who has not been paid in accordance with subsection 1
5 of this section may bring an action in a court of competent jurisdiction against
6 a person who has failed to pay . The court may in addition to any other award
7 for damages, award interest at the rate of up to one and one-half percent per
8 month from the date payment was due pursuant to the terms of the contract,
9 and reasonable attorney fees, to the prevailing party . If the parties elect to
10 resolve the dispute by arbitration pursuant to section 435.350, the arbitrator
11 may award any remedy that a court is authorized to award hereunder .
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12 3. The provisions of this section shall not apply to contracts for private
13 construction work for the building, improvement, repair or remodeling of
14 owner -occupied residential property of four units or less.
15 4. For purposes of this section, design or construction work shall
16 include design, construction, alteration, repair or maintenance of any building,
17 roadway or other structure or improvement to real property , or demolition or
18 excavation connected therewith, and shall include the furnishing of surveying,
19 architectural, engineering or landscape design, planning or management
20 services, labor or materials, in connection with such work. ]
✔
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