Improvements to Real Property – when payment is due.
Section 87-7-3 of the Mississippi Code applies to all payments due to a contractor under all construction contracts (excluding public construction contracts).
With respect to partial, progress or interim payments, they must be paid whenever the parties’ contract says they are due. If such payments are not made within thirty (30) days of the due date, they bear interest from the due date at the rate of one percent (1%) per month.
Final payment is due upon the earliest of these three events:
(i) At the completion of the project or after the work has been substantially completed in accordance with the terms and provisions of the contract;
(ii) When the owner beneficially uses or occupies the project except in the case where the project involves renovation or alteration to an existing facility in which the owner maintains beneficial use or occupancy during the course of the project; or
(iii) When the project is certified as having been completed by the architect or engineer authorized to make such certification, whichever event shall first occur.
Again, if the final payment is not made within thirty (30) days of the due date, it bears interest from the due date at one percent (1%) per month.
Note: In no event shall the final payment due the contractor be made until the consent of the contractor’s surety has been obtained in writing and delivered to the proper contracting authority.
Rights of subcontractors and material suppliers
Pursuant to Section 87-7-5, when a contractor receives any payment from the owner, the contractor shall pay each subcontractor and material supplier in proportion to the percentage of work completed by each such subcontractor and material supplier.
If for any reason the contractor receives less than the full payment due from the owner, 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 due on the payment.
If the contractor without reasonable cause fails to make any payment to his subcontractors and material suppliers within fifteen (15) days after the receipt of payment from the owner under the construction contract, the contractor shall pay to his subcontractors and material suppliers, in addition to the payment due them, a penalty in the amount of one-half of one percent (½ of 1%) per day of the delinquency, calculated from the expiration of the fifteen-day period until fully paid. The total penalty shall not exceed fifteen percent (15%) of the outstanding balance due.
Note: Section 87-7-5 does not apply to contracts for the construction of single-family dwellings.
Choice of law provisions
In 2018, Section 87-7-9 went into effect. It applies to construction contracts that meet these three conditions:
1. The contract was entered into on or after July 1, 2018;
2. At least one party to the contract is a Mississippi resident; and
3. The contract is between any two or more of the following persons and no others: the owner of the real property improved or to be improved, a contractor, subcontractor, materialman or design professional.
Under this statute, if all three conditions are met, then a provision in any contract, subcontract, or purchase order for the improvement of real property in this state, or to provide materials therefore, is void and against public policy if it makes the contract, subcontract, or purchase order subject to the laws of another state, or provides that the exclusive forum for any litigation, arbitration, or other dispute resolution process be located in another state.
On a related matter, read here about Mississippi’s New Home Warranty Act.
Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110