CHAPTER 742b
COMMERCIAL CONSTRUCTION CONTRACTS

Table of Contents

Sec. 42-158i. Definitions.
Sec. 42-158j. Required contract provisions re timely payment of contractors, subcontractors and suppliers. Payment requisition statement. Remedy for untimely payments. Penalties. Escrow accounts. Withholding payments due because of disputes prohibited. Progress payments. Rights of action.
Sec. 42-158k. Retainage limitation.
Sec. 42-158l. Clauses waiving right to claim mechanic's lien or claim against a payment bond void.
Sec. 42-158m. Adjudication in this state.
Sec. 42-158n. Required job site postings.
Sec. 42-158o. Surety obligations.
Sec. 42-158p. Retainage escrow accounts. Monthly reports. Combining accounts. Termination of accounts. Fees and expenses. Form and provision of account. Failure to deposit or release retainage. Acceptance of securities.
Sec. 42-158q. Escrow account exclusions.
Sec. 42-158r. Enforcement of retainage and adjudication in this state.
Secs. 42-158s to 42-158z.

      Sec. 42-158i. Definitions. As used in sections 42-158i to 42-158n, inclusive, unless the context otherwise requires:

      (1) "Owner" means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company or other business entity that is the owner of record or lessee of real property upon which construction, renovation or rehabilitation is to be or is being performed pursuant to a construction contract regarding such real property.

      (2) "Construction contract" or "contract" means any contract for the construction, renovation or rehabilitation in this state on or after October 1, 1999, including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for construction, renovation or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor. "Construction contract" or "contract" does not include (A) any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state, (B) a contract or project funded or insured by the United States Department of Housing and Urban Development, (C) a contract between an owner and a contractor for an amount of twenty-five thousand dollars or less or a subcontract which results from such a contract, or (D) a contract for a building intended for residential occupancy containing four or less units.

      (3) "Retainage" means a sum withheld from progress payments to the contractor or subcontractor, otherwise payable to a contractor or subcontractor by an owner conditioned on substantial or final completion of all work in accordance with the terms of a written or verbal construction contract, but does not include any sum withheld due to the contractor's or subcontractor's failure to comply with construction plans and specifications.

      (P.A. 99-153, S. 1; P.A. 03-56, S. 1; 03-167, S. 5; P.A. 04-202, S. 1.)

      History: P.A. 03-56 made technical changes, amended Subdiv. (1) to delete language re commercial or industrial building and residential occupancy or use and to add "of record" in definition of "owner" and amended Subdiv. (2) to add exemption for buildings intended for residential occupancy containing four or less units in definition of "construction contract" or "contract"; P.A. 03-167 added provisions in Subdiv. (3) re sum otherwise payable to a contractor or subcontractor by an owner conditioned on substantial or final completion of all work in accordance with the terms of a written or verbal construction contract, effective January 1, 2004; P.A. 04-202 amended the definition of "owner" in Subdiv. (1) by adding reference to nonprofit corporation, deleting reference to commercial or industrial building and making related technical changes re construction, renovation or rehabilitation of property, amended the definition of "construction contract" or "contract" in Subdiv. (2) by deleting reference to commercial or industrial building and making related technical changes re construction, renovation or rehabilitation of property, and by adding Subparas. (B) and (C) excluding from "construction contract" and "contract" a contract or project funded or insured by the U.S. Department of Housing and Urban Development, and a contract between an owner and a contractor for $25,000 or less or a subcontract which results from such a contract, respectively, designating existing language as Subparas. (A) and (D).

      See Sec. 42-158p re retainage escrow accounts.

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      Sec. 42-158j. Required contract provisions re timely payment of contractors, subcontractors and suppliers. Payment requisition statement. Remedy for untimely payments. Penalties. Escrow accounts. Withholding payments due because of disputes prohibited. Progress payments. Rights of action. (a) Each construction contract shall contain the following provisions: (1) A requirement that the owner pay any amounts due any contractor, subcontractor or supplier in a direct contractual relationship with the owner, whether for labor performed or materials furnished, not later than thirty days after the date any written request for payment has been made by such contractor, subcontractor or supplier; (2) a requirement that the contractor pay any amounts due any subcontractor or supplier, whether for labor performed or materials furnished, not later than thirty days after the date the contractor receives payment from the owner which encompasses labor performed or materials furnished by such subcontractor or supplier; and (3) a requirement that the contractor shall include in each of its subcontracts a provision requiring each subcontractor and supplier to pay any amounts due any of its subcontractors or suppliers, whether for labor performed or materials furnished, not later than thirty days after the date such subcontractor or supplier receives a payment from the contractor which encompasses labor performed or materials furnished by such subcontractor or supplier.

      (b) Each payment requisition submitted in accordance with the requirements of subsection (a) of this section shall include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract. Such statement shall identify the pending construction change orders and other pending change directives, and shall include the date such change orders and directives were initiated, the costs associated with their performance and a description of any work completed. As used in this section, "pending construction change order" or "other pending change directive" means an authorized directive for extra work that has been issued to a contractor or a subcontractor.

      (c) (1) If payment is not made by an owner in accordance with the requirements of subdivision (1) of subsection (a) of this section or any applicable construction contract, such contractor, subcontractor or supplier shall set forth its claim against the owner through notice by registered or certified mail.

      (2) If payment is not made by a contractor in accordance with the requirements of subdivision (2) of subsection (a) of this section or any applicable construction contract, the subcontractor or supplier shall set forth its claim against the contractor through notice by registered or certified mail.

      (3) If payment is not made by a subcontractor or supplier in accordance with the provisions of subdivision (3) of subsection (a) of this section, the subcontractor or supplier to whom money is owed shall set forth its claim against the subcontractor or supplier who has failed to comply with the provisions of said subdivision (3) through notice by registered or certified mail.

      (4) Ten days after the receipt of any notice specified in subdivisions (1), (2) and (3) of this subsection, the owner, contractor, subcontractor or supplier, as the case may be, shall be liable for interest on the amount due and owing at the rate of one per cent per month. Such interest shall accrue beginning on the date any such notice is received. In addition, such owner, contractor, subcontractor or supplier, upon written demand from the party providing such notice, shall be required to place funds in the amount of the claim, plus such interest of one per cent per month, in an interest-bearing escrow account in a bank in this state, provided such owner, contractor, subcontractor or supplier may refuse to place the funds in escrow on the grounds that the party making such demand has not substantially performed the work or supplied the materials according to the terms of the construction contract. In the event that such owner, contractor, subcontractor or supplier refuses to place such funds in escrow and such owner, contractor, subcontractor or supplier is found to have unreasonably withheld payment due a party providing such notice, such owner, contractor, subcontractor or supplier shall be liable to the party making demand for payment of such funds and for reasonable attorneys' fees plus interest on the amount due and owing at the rate of one per cent per month. In addition, any owner, contractor, subcontractor or supplier who is found to have withheld payments to a party providing such notice in bad faith shall be liable for ten per cent damages.

      (d) No payment may be withheld from a subcontractor or supplier for work performed or materials furnished because of a dispute between a contractor and another contractor, subcontractor or supplier.

      (e) This section shall not be construed to prohibit progress payments prior to final payment of the contract and is applicable to all subcontractors and suppliers for material or labor whether they have contracted directly with the contractor or with some other subcontractor on the work. Each owner that enters into a contract under this section and fails or neglects to make payment to a contractor for labor and materials supplied under a contract, as required pursuant to this section, shall, upon demand of any person who has not been paid by the contractor for such labor and materials supplied in the performance of the work under the contract, promptly pay the person for such labor or materials. Demand for payment shall be served on the owner and a copy of each demand shall be sent to the contractor by certified mail, return receipt requested to any address at which the owner and contractor conduct business. If the owner fails to make such payment, the person shall have a direct right of action against the owner in the superior court for the judicial district in which the project is located. The owner's obligations for direct payments to the contractor, subcontractors or suppliers giving notice pursuant to this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.

      (P.A. 99-153, S. 2; P.A. 04-202, S. 2; P.A. 09-146, S. 1.)

      History: P.A. 04-202 amended Subsec. (a) by making provisions mandatory, amending within said Subsec. Subdiv. (1) to change the time within which an owner shall pay a contractor, subcontractor or supplier from 15 days to 30 days from any written request, Subdiv. (2) to change the time within which a contractor shall pay any subcontractor or supplier from 15 to 30 days, and Subdiv. (3) to change time within which a subcontractor or supplier shall pay its subcontractors or suppliers from 15 to 30 days, amended Subsec. (b)(4) by making an owner, contractor, subcontractor or supplier liable to the party making demand for payment of funds, and amended Subsec. (d) by adding provisions that each owner who enters into a contract under this section and who fails or neglects to pay the contractor, shall, upon demand of any person who has not been paid by the contractor, promptly pay such person, that the demand be served on the owner and a copy sent to the contractor, that if the owner fails to make payment, the person shall have a direct right of action against the owner, and that the owners obligation for direct payments are limited to the amount owed to the contractor by the owner; P.A. 09-146 added new Subsec. (b) re payment requisition statement requirements and redesignated existing Subsecs. (b) to (d) as Subsecs. (c) to (e), effective July 1, 2009.

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      Sec. 42-158k. Retainage limitation. No construction contract may provide for any retainage in an amount that exceeds five per cent of the estimated amount of a progress payment for the life of the construction project.

      (P.A. 99-153, S. 3; P.A. 03-167, S. 8; P.A. 10-148, S. 1.)

      History: P.A. 03-167 deleted provision re section not to be construed to require construction contract to contain retainage provision, effective January 1, 2004; P.A. 10-148 changed retainage limitation from 7.5% to 5%.

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      Sec. 42-158l. Clauses waiving right to claim mechanic's lien or claim against a payment bond void. (a) Any provision in a construction contract or any periodic lien waiver issued pursuant to a construction contract that purports to waive or release the right of a contractor, subcontractor or supplier engaged to perform services, perform labor or furnish materials under the construction contract to (1) claim a mechanic's lien, or (2) make a claim against a payment bond, for services, labor or materials which have not yet been performed and paid for shall be void and of no effect.

      (b) Notwithstanding any provision of subsection (a) of this section, this section shall not be construed to prohibit (1) the subordination of a mechanic's lien to the lien of a mortgage or security interest, or (2) the enforcement of an agreement to subordinate a mechanic's lien to the lien of a mortgage or security interest.

      (P.A. 99-153, S. 4.)

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      Sec. 42-158m. Adjudication in this state. Any provision in a construction contract for the performance of work on a construction site located in this state that purports to require that any dispute arising under the construction contract be adjudicated in or under the laws of a state other than Connecticut shall be void and of no effect, regardless of whether the construction contract was executed in this state.

      (P.A. 99-153, S. 5.)

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      Sec. 42-158n. Required job site postings. At or before the commencement of any work under a construction contract, the owner shall post and maintain in a conspicuous place at the construction site (1) the name and address of the owner and any agent authorized to accept service of a certificate of mechanic's lien on behalf of the owner in any action, suit or proceeding for the enforcement of any obligation of the owner arising out of the construction contract, (2) the volume and page number of the land records of the town in which such property is located, and (3) if a payment bond exists, the name and address of the surety that issued the payment bond.

      (P.A. 99-153, S. 6.)

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      Sec. 42-158o. Surety obligations. No surety shall be obligated to include in the payment of a bond issued by such surety any interest, costs, penalties or attorneys' fees imposed on the principal of such bond under any provision of sections 42-158i to 42-158o, inclusive, or 49-33 or subsection (a) of section 52-249, unless the terms of the bond expressly reference said sections and subsection and state that such surety is obligated to pay such interest, costs, penalties or attorneys' fees.

      (P.A. 99-153, S. 9.)

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      Sec. 42-158p. Retainage escrow accounts. Monthly reports. Combining accounts. Termination of accounts. Fees and expenses. Form and provision of account. Failure to deposit or release retainage. Acceptance of securities. An escrow account shall be established for all retainage, subject to the following:

      (a) An escrow account shall be established in state or national banks domiciled in this state or in savings and loan associations domiciled in this state.

      (b) The owner shall provide a monthly report to the contractor as to the value of the retainage being held in the escrow account and any additions to or payments from the escrow account. Upon request by a subcontractor, the contractor shall make such monthly report available for review by the subcontractor. Withdrawals from the escrow account shall be made only subject to approval of the owner.

      (c) If the owner has entered into more than one construction contract with the same contractor requiring the maintenance of escrow accounts, the owner may elect to combine the amounts held as retainage under each contract into one or more escrow accounts or may establish a separate escrow account for each contract.

      (d) The escrow account shall be terminated upon substantial or final completion of all work in accordance with the terms of the construction contract and full payment to the contractor.

      (e) All fees and expenses related to maintaining the escrow account shall be paid by the owner.

      (f) The form and provisions of the escrow account shall be included in all solicitations for construction services and shall be provided to the contractor and subcontractor prior to entering into a contract with the owner. Upon request by a subcontractor, the contractor shall make such form and provisions available for review by the subcontractor. Failure to comply with the provisions of this subsection shall not give rise to a defense to the enforcement of a contract.

      (g) If an owner fails to deposit retainage that is withheld or to release retainage as required by public act 03-167*, the owner shall pay to the contractor an additional one and one-half per cent of the amount not deposited or released for each month or fraction of a month, until the retainage amount is paid in full.

      (h) An owner may accept securities in lieu of retainage from a contractor and a contractor may accept securities in lieu of retainage from a subcontractor.

      (i) For the purposes of this section, "owner" means "owner", as defined in subdivision (1) of section 42-158i.

      (P.A. 03-167, S. 6.)

      *Note: Public act 03-167 is entitled "An Act Concerning Retainage, the New Home Construction Act, the Home Improvement Contractor Act and the Home Solicitation Sales Act". (See Reference Table captioned "Public Acts of 2003" in Volume 16 which lists the sections amended, created or repealed by the act.)


      History: P.A. 03-167 effective January 1, 2004.

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      Sec. 42-158q. Escrow account exclusions. The provisions of section 42-158p do not apply to construction contracts for residential property containing four or fewer dwelling units or to construction contracts of less than twenty-five thousand dollars total value or to construction contracts relating to any public building or public work of the state or a municipality or other political subdivision of the state.

      (P.A. 03-167, S. 7.)

      History: P.A. 03-167 effective January 1, 2004.

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      Sec. 42-158r. Enforcement of retainage and adjudication in this state. In an action to enforce the provisions of section 42-158k, 42-158m or 42-158p, a court may award court costs and reasonable attorney's fees to the prevailing party.

      (P.A. 03-167, S. 9.)

      History: P.A. 03-167 effective January 1, 2004.

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      Secs. 42-158s to 42-158z. Reserved for future use.

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