H.B. 230

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CONSTRUCTION CONTRACT LAW
2 AMENDMENTS
3 1998 GENERAL SESSION
4 STATE OF UTAH
5 Sponsor: Peter C. Knudson
6 AN ACT RELATING TO COMMERCE AND TRADE; DEFINING A CONTINGENT
7 PAYMENT CLAUSE IN A CONSTRUCTION CONTRACT; MAKING CONTINGENT
8 PAYMENT CLAUSES UNENFORCEABLE IN CERTAIN CONSTRUCTION WORK; AND
9 MAKING TECHNICAL CHANGES.
10 This act affects sections of Utah Code Annotated 1953 as follows:
11 AMENDS:
12 13-8-4, as enacted by Chapter 86, Laws of Utah 1997
13 Be it enacted by the Legislature of the state of Utah:
14 Section 1. Section 13-8-4 is amended to read:
15 13-8-4. Obligation to pay under construction contracts -- Contingent payment
16 clauses void -- Rights of parties under contingent payment provisions.
17 (1) For purposes of this section:
18 (a) "Construction contract" means a contract or agreement to provide services, labor, or
19 materials for the design, construction, installation, or repair of an improvement to real property
20 located in Utah.
21 (b) "Contingent payment [contract] clause" means a clause in a construction contract
22 between a contractor and a subcontractor that makes a payment from the contractor to the
23 subcontractor contingent on the contractor receiving a corresponding payment from any other
24 public or private party, including a private owner.
25 (c) "Contractor" means a person who is or may be awarded a contract for the construction,
26 alteration, or repair of any building, structure, or improvement to real property.
27 (d) "Subcontractor" means any person engaged by a contractor to provide services, labor,

1 or materials for the design, construction, installation, or repair of an improvement to real property
2 and includes a supplier and a trade contractor or specialty contractor.
3 (2) A party to a construction contract shall make all scheduled payments under the terms
4 of the construction contract.
5 (3) The existence of a contingent payment clause which conditions payment from a
6 contractor to a subcontractor upon receipt of payment by the contractor from an owner or other
7 party is void, against public policy, and unenforceable.
8 (4) The existence of a contingent payment clause which would require a contractor or
9 subcontractor to waive a claim against a payment bond before the contractor or subcontractor has
10 been paid for the labor or material or both that the contractor or subcontractor has furnished is
11 void, against public policy, and unenforceable.
12 [(3)] (5) (a) The existence of a contingent payment [contract] clause is not a defense to a
13 claim to enforce a mechanics' lien filed under Title 38, Chapter 1, Mechanics' Liens.
14 (b) Subsection [(3)](5) does not apply to contracts for private construction work for the
15 building, improvement, repair, or remodeling of residential property consisting of four units or
16 less.
17 [(4)] (6) If a construction contract [is a] has any contingent requirements regarding
18 payment [contract]:
19 (a) [the] a subcontractor may request from the contractor the financial information that the
20 contractor has received from the public or private party regarding:
21 (i) the project financing; and
22 (ii) the public or private party; and
23 (b) if information is requested by the subcontractor under Subsection (4)(a), the contractor
24 shall provide the information prior to the subcontractor signing the construction contract between
25 the contractor and the subcontractor.
26 [(5) This section applies] (7) Subsections (1), (2), (5), and (6) apply to a contract executed
27 on or after May 5, 1997. Subsections (3) and (4) apply to a contract executed on or after May 4,
28 1998.


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Legislative Review Note
as of 12-17-97 3:22 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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