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6261S.03C
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SENATE COMMITTEE SUBSTITUTE
FOR
SENATE BILL NO. 1452
AN ACT
To 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are repealed and two new sections enacted in lieu thereof, to
be known as sections 436.300 and 436.303, to read as follows:
436.300. 1. As used in sections 436.300 to 436.336,
the following terms mean:
(1) "Construction", furnishing labor, equipment,
material, or supplies used, leased, or consumed for the
design, construction, alteration, renovation, repair, or
maintenance of a building, structure, access, road, bridge,
all utilities' lines including, but not limited to, water
lines, sewer lines, oil lines, gas lines, and fiber optic
lines, appurtenance or other improvement to real property
including any moving, demolition, design, or excavation;
(2) "Contract", a contract or agreement concerning
construction made and entered into by and between an owner
and a contractor, a contractor and a subcontractor, or a
subcontractor and another subcontractor;
(3) "Contractor", a person performing construction and
having a contract with an owner or tenant of the real
property;
(4) "Owner", any person or entity holding a record
ownership or beneficial interest in real property at the
time any contractor, subcontractor or materialman agrees or
is requested to furnish any work, labor, material, fixture,
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engine, boiler, or machinery, who contracts for improvements
or knowingly permits a third party to contract for
improvements, on the real property;
(5) "Residential real property":
(a) Shall include:
a. Any parcel of real estate improved or unimproved
that is intended to be used or is used for the construction
of residential structures and related improvements which
support the residential use of the land where such
residential structures are intended, upon completion, to be
occupied or sold. Such residential structures shall include
any residential dwelling consisting of sixteen units or
less, including condominiums, townhouses, or cooperatives;
and
b. Any improvements, including streets, sidewalks,
utility services, improved common areas, or other
facilities, which are constructed within the defined
residential use structures, or are serving such defined
residential use structures, or are located on or within any
common ground, common elements, or the separate and
identifiable parcels identified for residential use;
(b) Shall not include:
a. Any mixed use or planned unit developments except
to the extent that any residential uses of such developments
are, or will be, located on separate, identifiable parcels
from the nonresidential uses and this exception shall only
apply to those residential uses; or
b. Multifamily rental, student housing or dormitories,
or assisted living, skilled nursing, or similar facilities;
(6) "Subcontractor", any person of every tier
performing construction covered by a contract between an
owner and a contractor but not having a contract with the
owner;
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(7) "Substantial completion", the same meaning as such
term is described in section 436.327.
2. For the purposes of sections 436.300 to 436.336,
design or construction work shall include design,
construction, alteration, repair, or maintenance of any
building, roadway, or other structure or improvement to real
property, or demolition or excavation connected therewith,
and shall include the furnishing of surveying,
architectural, engineering or landscape design, planning or
management services, labor or materials, in connection with
such work.
3. Notwithstanding any other law to the contrary, all
parties to any contract or agreement for private
construction work that is between any owner and any
contractor, or between any contractor and any subcontractor,
or between any subcontractor and any sub-subcontractor, or
any supplier at whatever tier for construction,
reconstruction, maintenance, alteration, or repair for a
private owner of any building, improvement, structure,
private road, appurtenance, or appliance, including moving,
demolition, or any excavating connected therewith, shall
make payment in accordance with the terms of such contract
or agreement, provided such terms are not inconsistent with
the provisions of sections 436.300 to 436.336.
4. (1) An owner shall make progress payments to the
contractor and any professional engineer, architect,
landscape architect, or land surveyor on at least a monthly
basis, or on a milestone basis as the work progresses, or on
a lump sum basis according to the terms of the lump sum
contract. Except in the case of lump sum and milestone
contracts, payments shall be based upon estimates prepared
at least monthly of work performed and material delivered or
purchased and stored for the project per the requirements of
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the contract documents. Retainage withheld on any
construction contract or subcontract for private
construction projects shall comply with the requirements set
forth in section 436.303.
(2) Payments shall be considered received within the
context of this section when the funds are:
(a) Physically delivered;
(b) Posted at the post office or mailed by registered
mail;
(c) Mailed by certified mail with return receipt
requested or a certificate of mailing; or
(d) Electronically transferred.
(3) If in the discretion of the owner and when
applicable under the contract, the project architect or
engineer, and the contractor, it is determined that a
subcontractor's performance has been completed and the
subcontractor can be released prior to substantial
completion of the contract without risk to the owner, the
contractor shall request such adjustment in retainage, if
any, from the owner as necessary to enable the contractor to
pay the subcontractor in full. The owner may reduce or
eliminate retainage on any contract payment if in the
owner's opinion the work is proceeding satisfactorily. The
contractor shall have no obligation to release retainage to
a subcontractor unless and until the contractor has received
corresponding retainage from the owner for that
subcontractor's work. If retainage is released and there
are any remaining minor items to be completed, an amount
equal to one hundred fifty percent of the value of each item
as determined by the owner's duly authorized representatives
shall be withheld until such item or items are completed.
(4) Upon substantial completion, the owner shall pay
at least ninety-eight percent of the retainage, less any
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offsets or deductions authorized in the contract or
otherwise authorized by law, to the contractor. The
contractor shall pay the subcontractor or supplier after
substantial completion of the contract work and acceptance
by the owner's authorized contract representative. Such
payment shall be made within thirty days after acceptance
and the invoice and all other appropriate documentation and
certifications in complete and acceptable form are provided,
as may be required by the contract documents. If the owner
or the owner's representative determines the work is not
substantially completed and accepted, the owner or the
owner's representative shall provide a written explanation
of why the work is not considered substantially completed
and accepted within fourteen calendar days to the
contractor, who shall then provide such notice to the
subcontractor or suppliers responsible for such work. If
such written explanation is not given by the owner, the
owner shall pay at least ninety-eight percent of the
retainage within thirty calendar days. If at that time
there are any remaining minor items to be completed, an
amount equal to one hundred fifty percent of the value of
each item as determined by the owner or owner's
representative shall be withheld until such items are
completed.
(5) All estimates or invoices for supplies and
services purchased, approved, and processed or final
payments shall be paid promptly and shall be subject to late
payment charges as provided in this section. Except as
provided in subdivision (4) of this subsection, if the
contractor has not been paid within thirty days as set forth
in this section, the owner shall pay the contractor, in
addition to the payment due to the contractor, interest at
the rate of one and one half percent per month calculated
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from the expiration of the thirty-day period until fully
paid. Any person who has not been paid may bring an action
in a court of competent jurisdiction against a person who
has failed to pay. The court may, in addition to any other
award for damages, award interest at the rate of up to one
and one-half percent per month from the date payment was due
under the terms of the contract and reasonable attorney's
fees to the prevailing party. If the parties elect to
resolve the dispute by arbitration under section 435.350, or
the corresponding provisions of the Federal Arbitration Act,
the arbitrator may award any remedy that a court is
authorized to award hereunder.
(6) Within two business days after payment from the
owner to the contractor for one or more subcontractors'
work, the owner shall notify each subcontractor in writing
or electronically. When a contractor receives any payment,
the contractor shall pay each subcontractor and material
supplier in proportion to the work completed by each
subcontractor and material supplier their application less
any retainage as set forth in section 436.303. If the
contractor receives less than the full payment due under the
construction contract, the contractor shall be obligated to
disburse on a pro rata basis those funds received, with the
contractor, subcontractors, and material suppliers each
receiving a prorated portion based on the amount of
payment. When, however, the owner does not release the full
payment due under the contract because there are specific
areas of work or materials the owner is rejecting or because
the owner has otherwise determined such areas are not
suitable for payment, those specific subcontractors or
suppliers involved shall not be paid for that portion of the
work rejected or deemed not suitable for payment, provided
the owner, or the owner's representative, gives a written
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explanation to the contractor, subcontractor, or supplier
involved as to why the work or supplies were rejected or
deemed not suitable for payment, and all other
subcontractors and suppliers shall be paid in full.
(7) If the contractor, without reasonable cause, fails
to make any payment to his or her subcontractors and
material suppliers within fifteen days after receipt of
payment under the construction contract, the contractor
shall pay to his or her subcontractors and material
suppliers, in addition to the payment due to them, interest
in the amount of one and one-half percent per month,
calculated from the expiration of the fifteen-day period
until fully paid. This subdivision shall also apply to any
payments made by subcontractors and material suppliers to
their subcontractors and material suppliers and to all
payments made to lower-tier subcontractors and material
suppliers throughout the contracting chain.
(8) The owner shall make final payment of all moneys
owed to the contractor, including any retainage withheld
under subdivision (4) of this subsection, less any offsets
or deductions authorized in the contract or otherwise
authorized by law, within thirty days of the due date.
Final payment shall be considered due upon the earliest of
the following events:
(a) Completion of the project and filing with the
owner of all required documentation and certifications, in
complete and acceptable form, in accordance with the terms
and conditions of the contract; or
(b) The project reaches substantial completion.
5. Nothing in this section shall prevent the
contractor or subcontractor, at the time of application or
certification to the owner or contractor, from withholding
such applications or certifications to the owner or
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contractor for payment to the subcontractor or material
supplier. Amounts intended to be withheld shall not be
included in such applications or certifications to the owner
or contractor. Reasons for withholding such applications or
certifications shall include, but not be limited to, the
following:
(1) Unsatisfactory job progress;
(2) Defective construction work or material not
remedied;
(3) Disputed work;
(4) Failure to comply with other material provisions
of the contract or other specific contractual condition to
payment;
(5) Third-party claims filed or reasonable evidence
that a claim will be filed;
(6) Failure of the subcontractor to make timely
payments for labor, equipment, and materials;
(7) Damage to a contractor or another subcontractor or
material supplier; or
(8) Reasonable evidence that the contract cannot be
completed for the unpaid balance of the subcontract sum or a
reasonable amount for retention, not to exceed the initial
percentage retained by the owner.
6. If the contractor determines, after application or
certification has been made and after payment has been
received from the owner, or after payment has been received
by a contractor based upon the owner's estimate of materials
in place and work performed as provided by contract, that
all or a portion of the moneys needs to be withheld from a
specific subcontractor or material supplier for any of the
reasons enumerated in this section, and such moneys are
withheld from such subcontractor or material supplier, such
undistributed amounts shall be specifically identified in
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writing and deducted from the next application or
certification made to the owner or from the next estimate by
the owner of payment due to the contractor until a
resolution of the matter has been achieved. Disputes shall
be resolved in accordance with the terms of the contract
documents. Upon such resolution the amounts withheld by the
contractor from the subcontractor or material supplier shall
be included in the next application or certification made to
the owner or the next estimate by the owner and shall be
paid promptly in accordance with the provisions of this
section. This subsection shall also apply to applications
or certifications made by subcontractors or material
suppliers to the contractor and throughout the various tiers
of the contracting chain.
7. For contracts that provide for payments to the
contractor based upon the owner's estimate of materials in
place and work performed rather than applications or
certifications submitted by the contractor, the owner shall
pay the contractor within thirty days following the date
upon which the estimate is required by contract to be
completed by the owner, the amount due less a retainage as
set forth in section 436.303. All such estimates by the
owner shall be paid promptly and shall be subject to late
payment charges as provided in this subsection. After the
thirtieth day following the date upon which the estimate is
required by contract to be completed by the owner, the owner
shall pay the contractor, in addition to the payment due to
the contractor, interest at a rate of one and one-half
percent per month calculated from the expiration of the
thirty-day period until fully paid.
8. The owner shall pay or cause to be paid to any
professional engineer, architect, landscape architect, or
land surveyor the amount due within thirty days following
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the receipt of an invoice prepared and submitted in
accordance with the contract terms. In addition to the
payment due, the owner shall pay interest at the rate of one
and one-half percent per month calculated from the
expiration of the thirty-day period until fully paid.
9. Nothing in this section shall prevent the owner
from withholding payment or final payment from the
contractor or a subcontractor or material supplier. Reasons
for withholding payment or final payment shall include, but
not be limited to:
(1) Liquidated damages;
(2) Unsatisfactory job progress;
(3) Defective construction work or material not
remedied;
(4) Disputed work;
(5) Failure to comply with any material provision of
the contract or other specific contractual condition for
payment;
(6) Third-party claims filed or reasonable evidence
that a claim will be filed;
(7) Failure to make timely payments for labor,
equipment, or materials;
(8) Damage to a contractor, subcontractor, or material
supplier;
(9) Reasonable evidence that a subcontractor or
material supplier cannot be fully compensated under its
contract with the contractor for the unpaid balance of the
contract sum; or
(10) Citation by the enforcing authority for acts of
the contractor or subcontractor that do not comply with any
material provision of the contract and that result in a
violation of any federal, state, or local law, regulation,
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or ordinance applicable to that project causing additional
costs or damages to the owner.
10. In addition to contractor's rights under
subsection 5 of this section, subcontractors, whether or not
specifically required in the contract, specifically grant
the contractor the right to hold future payments until lien
waivers are provided and until the contractor receives
confirmation of account status from any of the parties
previously noted. The contractor shall have the right to
remedy unpaid balances associated with the subcontractors'
obligations through all legal means noted in the contract
including, but not limited to, issuing joint checks between
the subcontractor and third party vendors. In the event
that the contractor is required to issue a payment in the
form of a joint check, a processing fee shall be charged to
the subcontractor not exceeding two hundred fifty dollars
and withheld from future payments.
11. Nothing in this section shall be construed to
require direct payment by an owner to a subcontractor or
supplier.
12. Notwithstanding any other provisions in this
section to the contrary, no late payment interest shall be
due and owing for payments that are withheld in good faith
for reasonable cause under subsections 6, 9, and 10 of this
section. If it is determined by a court of competent
jurisdiction that a payment that was withheld under
subsections 6, 9, and 10 of this section was not withheld in
good faith for reasonable cause, the court may impose
interest at the rate of one and one-half percent per month
calculated from the date of the invoice and may, in its
discretion, award reasonable attorney's fees to the
prevailing party. In any civil action or part of a civil
action brought under this section, if a court determines
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after a hearing for such purpose that the cause was
initiated, or a defense was asserted, or a motion was filed,
or any proceeding therein was done frivolously and in bad
faith, the court shall require the party who initiated such
cause, asserted such defense, filed such motion, or caused
such proceeding to be had to pay the other party named in
such action the amount of the costs attributable thereto and
reasonable expenses incurred by such party, including
reasonable attorney's fees.
13. Nothing in this section shall be construed to
prevent any person who has not been paid in accordance with
this section from bringing an action in a court of competent
jurisdiction against a person who has failed to pay.
14. The provisions of this section shall not apply to
contracts for construction or design work on residential
real property.
436.303. A contract or agreement for private design or
construction work may include a provision for the retainage
of a portion of any payment due from the owner to the
contractor, not to exceed ten percent of the amount of such
payment due pursuant to the contract or agreement, to ensure
the proper performance of the contract or agreement,
provided that the contract may provide that if the
contractor's performance is not in accordance with the terms
of the contract or agreement, the owner may retain
additional sums to protect the owner's interest in
satisfactory performance of the contract or agreement.
There shall be no retainage if the contractor and each
subcontractor at any tier are bonded for both payment and
performance. The amount or amounts so retained by the owner
shall be referred to in sections 436.300 to 436.336 as
"retainage", and shall be held by the owner in trust for the
benefit of the contractor and contractor's subcontractors,
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sub-subcontractors, and suppliers at whatever tier who are
not in default, in proportion to their respective
interests. Such retainage shall be subject to the
conditions and limitations listed in sections 436.300 to
436.336.
[431.180. 1. All persons who enter into a
contract for private design or construction work
after August 28, 1995, shall make all scheduled
payments pursuant to the terms of the contract.
2. Any person who has not been paid in
accordance with subsection 1 of this section may
bring an action in a court of competent
jurisdiction against a person who has failed to
pay. The court may in addition to any other
award for damages, award interest at the rate of
up to one and one-half percent per month from
the date payment was due pursuant to the terms
of the contract, and reasonable attorney fees,
to the prevailing party. If the parties elect
to resolve the dispute by arbitration pursuant
to section 435.350, the arbitrator may award any
remedy that a court is authorized to award
hereunder.
3. The provisions of this section shall
not apply to contracts for private construction
work for the building, improvement, repair or
remodeling of owner-occupied residential
property of four units or less.
4. For purposes of this section, design or
construction work shall include design,
construction, alteration, repair or maintenance
of any building, roadway or other structure or
improvement to real property, or demolition or
excavation connected therewith, and shall
include the furnishing of surveying,
architectural, engineering or landscape design,
planning or management services, labor or
materials, in connection with such work.]