A. Except as provided in Subsection B of this section, all construction contracts shall provide that payment for amounts due shall be paid within twenty-one days after the owner receives an undisputed request for payment. Payment by the owner to the contractor may be made by first-class mailing, electronic funds transfer or by hand delivery of the undisputed amount of a pay request based on work completed or service provided under the contact. If the owner fails to pay the contractor within twenty-one days after receipt of an undisputed request for payment, the owner shall pay interest to the contractor beginning on the twenty-second day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until the payment is issued. If an owner receives an improperly completed invoice, the owner shall notify the sender of the invoice within seven days of receipt in what way the invoice is improperly completed, and the owner has no further duty to pay on the improperly completed invoice until it is resubmitted as complete.

B. A local public body may make payment within forty-five days after submission of an undisputed request for payment when grant money is a source of funding, if:

(1) the construction contract specifically provides in a clear and conspicuous manner for a payment later than twenty-one days after submission of an undisputed request for payment; and

(2) the following legend or substantially similar language setting forth the specified number of days appears in clear and conspicuous type on each page of the plans, including bid plans and construction plans:

"Notice of Extended Payment Provision

This contract allows the owner to make payment within ____________ days after submission of an undisputed request for payment.".

C. All construction contracts shall provide that contractors and subcontractors make prompt payment to their subcontractors and suppliers for amounts owed for work performed on the construction project within seven days after receipt of payment from the owner, contractor or subcontractor. If the contractor or subcontractor fails to pay the contractor's or subcontractor's subcontractor and suppliers by first-class mail or hand delivery within seven days of receipt of payment, the contractor or subcontractor shall pay interest to the subcontractors and suppliers beginning on the eighth day after payment was due, computed at one and one-half percent of the undisputed amount per month or fraction of a month until payment is issued. These payment provisions apply to all tiers of contractors, subcontractors and suppliers.

D. A creditor shall not collect, enforce a security interest against, garnish or levy execution on those progress payments or other payments that are owed by an owner, contractor or subcontractor to a person, or the owner's contractor's or subcontractor's surety, who has furnished labor or material pursuant to a construction contract.

E. When making payments, an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed.

History: Laws 2001, ch. 68, § 5; 2007, ch. 213, § 4.

The 2007 amendment, effective June 15, 2007, eliminated provisions concerning retainage and prohibited an owner, contractor or subcontractor from retaining amounts owed for work performed.

Interest penalty. — There is no provision in the Retainage Act (now the Prompt Payment Act) that provides a cut-off date, other than payment, for the running of interest penalty. J.R. Hale Contracting Co., Inc. v. Union Pac. R.R., 2008-NMCA-037, 143 N.M. 574, 179 P.3d 579.

The Retainage Act (now the Prompt Payment Act) does not require that a claim for penalty interest be raised only in a separate, distinct cause of action. J.R. Hale Contracting Co., Inc. v. Union Pac. R.R., 2008-NMCA-037, 143 N.M. 574, 179 P.3d 579.

The interest penalty can be imposed on a contractor. J.R. Hale Contracting Co., Inc. v. Union Pac. R.R., 2008-NMCA-037, 143 N.M. 574, 179 P.3d 579.

"Undisputed request for payment" construed. — In a contractual dispute, where defendant terminated its contract with plaintiff, which called for plaintiff to perform various construction services, claiming that plaintiff materially breached the contract by failing to use contractually required construction materials and by failing to follow the manufacturer's recommended application process for the construction materials used, defendant's correspondence to plaintiff indicating dissatisfaction with the application process of the construction materials and requests for confirmation that plaintiff was applying the construction materials in accordance with the manufacturer's recommendations, was sufficient notice that a question, or dispute, existed with respect to plaintiff's entitlement to payment for the subsequently invoiced work, and such notice was sufficient to limit liability for statutory interest under the Prompt Payment Act. Raising a challenge or question as to an invoiced item limits a defendant's liability for statutory interest. Unified Contractor, Inc. v. Albuquerque Housing Auth., 2017-NMCA-060.

Restitution for breaching party's part performance. — If a non-breaching party justifiably refuses to perform a contract on the ground that the non-breaching party's remaining duties of performance have been discharged by the breaching party's breach, the breaching party is entitled to restitution for any benefit that the breaching party has conferred by way of part performance or reliance in excess of the loss that the breaching has caused by the breaching party's own breach. The contract price may be used as evidence of the value conferred on the non-breaching party. Eker Bros., Inc. v. Rehders, 2011-NMCA-092, 150 N.M. 542, 263 P.3d 319.

Where a subcontractor ceased all work on a project; the general contractor had to repair the subcontractor's defective work and or to perform work that was not actually performed; based on the contract price of the work performed by the subcontractor, the court found that the value of the subcontractor's work to the date work stopped was $74,964.54 and that the general contractor was damaged in the amount of $42,448.39, the subcontractor was entitled to recover the difference between the benefit and the damages or $32,515.76. Eker Bros., Inc. v. Rehders, 2011-NMCA-092, 150 N.M. 542, 263 P.3d 319.