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8/6/2012 | Construction Blog

The State of Delaware has passed legislation that revises the statute governing construction contracts in Delaware. Signed into law by Governor Markell on June 25, 2012, the newly named Building Construction Procedures Act contains several significant changes worth noting.

The scope of the statute has been broadened to maximum effect. It now covers all services provided on any construction project – public or private. It goes further and mandates that all construction contracts for work in Delaware must be governed by Delaware law and that all litigation of any kind take place in Delaware. More specifically, forum selection and choice of law clauses that do not require litigation in Delaware and apply Delaware law are now void as a matter of public policy. This also includes all alternative dispute resolution procedures such as mediation and arbitration.

The revisions to the law also allow parties to recover significant penalties and attorneys’ fees against parties that withhold payment in bad faith. The penalties would amount to the contract balance withheld plus an additional payment that equals the amount wrongfully withheld. Attorneys’ fees and costs are also available to the “substantially prevailing party” without an apparent cap.

Finally, the new law changes the time for an owner or contractor to dispute a submitted invoice from 7 days to 15 days. If no written objection to the invoice is issued within 15 days of receipt, the invoice is deemed accepted as to the amount. Acceptance of the amount, however, does not constitute acceptance of the workmanship.

Construction companies working in Delaware should be aware of these changes. They are less than subtle and can change the cost structure and how a project should be approached in many significant ways.