Delaware Real Estate Law Update: Changes to Contractor Payment Rules

August 7, 2012

Publication| Real Estate Services

On June 25, 2012, Governor Jack Markell signed into effect House Bill No. 109, as amended, which revised what is sometimes called the contractor prompt payment act. Although the initial bill significantly modified the law, a late amendment to the bill eliminated all of the changes but one. With this recent change, contractors and subcontractors no longer have the freedom to select the governing law or venue for dispute resolution applicable to construction contracts for work to be performed in Delaware.

Under this legislation, any construction contract or subcontract contract will be void and unenforceable as against public policy if it (1) is governed by any law other than Delaware, or (2) requires litigation or other dispute resolution processes to occur in a state other than Delaware. As the legislation was finally enacted, this prohibition with respect to governing law and venue does not apply to other contracts, such as the contract between an owner and a general contractor. The legislation was effective when signed by the Governor.

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