USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
with respect to the treatment of delay claims and such provisions in the continued wake of the COVID-19 pandemic and its ripple effects, now more generally referred to as “supply chain dis - ruptions” ; this includes, for example, the recent 27 March 2024 Key Bridge collapse in Baltimore, Maryland, which has resulted in a temporary port shutdown. Risk allocation, for both schedule and economic impacts, has gained more focus over the last several years, with concerns related to sup - ply chain disruptions and market volatilities continuing to be a point of emphasis. Parties should consider giving careful attention to bid clarifications and contract terms with respect to potential pricing holds and market fluctuation as a result of delays and independent of delays. Owners can receive compensation for delays, including liquidated damages, if provided for in the contract, though these recoveries will not resolve the issue of the project delays. Own - ers should consider additional monitoring and options, such as providing for clearly developed procurement schedules, early procurement and storage arrangements, and predetermining the availability of alternative supply sources and suitable substitute materials. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance A common form of additional security to guaran - tee a contractor’s performance is a performance bond, which is required for most public projects. In private projects, there may also be completion guarantees provided from parent or related com - panies, depending on the nature of the transac - tion and the parties involved. Subcontractor default insurance programmes are also being implemented to mitigate project performance exposures for contractors. These
programmes insure the contractor for losses associated with defaulting subcontractors. Owners should be mindful that such insurance programmes do not include an owner’s ability to pursue insured claims, and that contractual provisions are needed between an owner and contractor/policy holder to make certain that the intended benefits of such insurance pro - grammes are being realised. 7.6 Liens or Encumbrances in the Event of Non-Payment Contractors and designers may file liens to encumber property in the event of non-payment pursuant to New Jersey liens law. Under New Jersey law, statutory liens for the prime contrac - tor and subcontractors generally must be filed within 90 days of last providing labour or mate - rials (120 days for residential projects) and the action to enforce the lien claim instituted within one year of the last provision of labour or materi - als to the project. The owner can remove a lien by posting a bond equal to 110% of the lien or by payment of money into court. A mortgage lien filed prior to a statutory lien being recorded, or a lien claimant’s properly filed and served Notice of Unpaid Balance, will generally have priority over such liens, though statutory limitations apply and should be consid - ered. In New Jersey, it is important to note that the New Jersey Prompt Payment Act provides that the contractor’s billing shall be deemed approved and certified 20 days after the owner receives it, unless the owner provides, before the end of the 20-day period, a written statement of the amount withheld and the reason for with- holding payment.
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