Tag Archives: supplier

Federal Subcontractors – Understanding the Basics of Your Rights Under the Miller Act.

By on May 31, 2016

By Jennifer Lynn

     Subcontractors commonly inquire as to what they can do to ensure they receive payment on a project. For federally-owned construction projects, subcontractors can look to the Miller Act as a source of security. The Miller Act, codified as 40 U.S.C. §§ 3131-3134, requires general contractors on federal projects to provide performance bonds and payment bonds to the awarding authority where the prime contract exceeds $100,000. The general contractor’s payment bond must list a “satisfactory” surety and cover the total amount of prime contract. 40 U.S.C. § 3131(b)(2).

     The primary purpose behind the Miller Act is to provide security to subcontractors. Because federal projects are immune from lien claims, the Miller Act provides an alternative to a traditional lien, which instead calls for subcontractors to file claims against the general contractor and its surety under the payment bond. See U.S. ex rel. Metric Electric, Inc. v. Enviroserve, Inc., 301 F.Supp.2d 56, 66 (D.Mass. 2003). As with any claim for payment, the subcontractor must establish that it is owed payment in order to establish an enforceable claim under the bond.  In addition to establishing a basic right to payment, subcontractors must meet other specific requirements to secure the benefits of the Act.

Who is Protected Under Miller Act Payment Bonds?

     The Miller Act requires payment bonds to secure the claims of “all persons supplying labor and material in carrying out the work provided for in the contract.” 40 U.S.C. § 3131(b)(2). “All persons,” for purposes of the Miller Act, applies to (1) first-tier subcontractors, which are contractors who directly contract with the general contractor; (2) second-tier subcontractors, those contractors with a subcontract with a first-tier subcontractor; (3) first-tier suppliers, which are suppliers who contract with the general contractor; and (4) second-tier suppliers that have a contract with a first-tier subcontractor but not a first-tier supplier. See U.S. ex rel. Water Works Supply Corp. v. George Hyman Constr. Co., 131 F.3d 28, 31 (1st Cir. 1997).

     Third-tier and more remote subcontractors and suppliers cannot recover under the Miller Act. Subcontractors and suppliers too remote to file a claim under the Miller Act can file ordinary claims for nonpayment for breach of contract or quasi-contract.  The Miller Act does not alter contractors’ rights in connection with claims for nonpayment, but rather provides security for payment to the “persons” covered by the Act.

What Must a Subcontractor Do to Obtain Security Under the Miller Act?

     Much like comparable statutes for state-owned construction projects, subcontractors must wait the requisite time to file a Miller Act bond claim and may need to provide initial notice to the general contractor. All subcontractors must wait 90 days after they last furnished labor or material to the project[1] before they may file a claim under a Miller Act payment bond. 40 U.S.C. § 3113(b)(2). The wait period serves the purpose of setting aside a reasonable amount of time for the subcontractor to receive payment for completed work. Bond claims filed before expiration of the notice period will be considered premature.

     Second-tier contractors must comply with the 90 day wait period and must also provide written notice of its claim to the general contractor. The notice must be in writing; it must be received by the general contractor within the first 90 days after the second-tier subcontractor last furnished labor or material on the project; it must state “with substantial accuracy” the amount claimed unpaid and due and the name of the party to whom the material or labor was supplied or performed (i.e. the first-tier subcontractor); and it must be delivered by a method that provides verification of delivery (i.e. certified or registered mail) or served by a U.S. marshal. 40 U.S.C. § 3133(b)(2).  The required notice must specifically demand payment from the general contractor.  See U.S. ex rel. John D. Ahern Co., Inc. v. J.F. White Contracting Co., 649 F.2d 29, 31-32 (1st Cir. 1981). The notice requirement is strictly construed, and failure to fully comply will bar the subcontractor from raising a recoverable bond claim.

     Subcontractors must file their claim on the bond within 1 year after the day of last furnishing labor or material on the project, 40 U.S.C. § 3133(b)(4), in the federal court in the district in which the project is located. 40 U.S.C. § 3133(b)(3)(B). Failure to file within the 1 year period will result in an absolute bar against the subcontractor’s bond claim. While a claim will be filed “in the name of the United States for the use of the person bringing the action,” 40 U.S.C. § 3133(b)(3)(A), the claim is a private one brought by the subcontractor and the federal government is explicitly exempt from liability to the subcontractor.

     The above summary covers the general parameters for subcontractors to file a bond claim on federally-owned public construction projects. Because each project presents a different set of facts, the process and outcome to recover for nonpayment and filing under the Miller Act will vary. If you are uncertain regarding your company’s ability to recover payment for its work on a federal construction project, or if your company has complied with the regulations or process governing Miller Act claims, you should contact a Massachusetts construction attorney to achieve the best possible outcome.

[1] For more information about “last date of work” and how it is calculated, read Payment Bonds on Federal Construction Projects – Last Date of Work.

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E-mail Acceptance Can Constitute Contract for Massachusetts Mechanic’s Liens

By on March 9, 2015

The Massachusetts Superior Court recently held that electronic communications and signatures — no less than physically signed documents — can constitute a “written contract” for general contractors, subcontractors and construction material suppliers, within the meaning of the Massachusetts mechanic’s lien statute, G. L. c. 254. In Clean Properties, Inc. v. Riselli (“Clean Properties”), the parties mainly communicated via e-mail. The defendant, a property owner, sought to discharge the mechanic’s lien levied against her property for work performed by the plaintiff, a contractor. Because the parties never executed a paper contract, the property owner argued that the contractor could not meet the mechanic’s lien statute’s requirement of a written contract. The court held otherwise.

Applying the Uniform Electronic Transactions Act (UETA) adopted by Massachusetts in 2004, the court held that, where there is a clear intent between parties to conduct their business via electronic means, an enforceable contract can be formed when one accepts a written offer via e-mail. Thus, in certain circumstances, an electronic signature — such as one’s name at the end of an e-mail — can have the same legal effect as a physical signature on paper. See G.L.c. 110G, §7(b) (“contracts may not be deemed unenforceable solely because electronic records were used in formation.”).

In Clean Properties, the parties’ e-mail correspondence made clear that each intended to enter into a contract. Specifically, the court held that the contractor had extended an offer by attaching contract terms to an e-mail with instructions for the property owner to respond, if desired, with an acceptance. The property owner replied as instructed and included her name at the end of the e-mail. Because this reply formed a contract under the UETA, the court concluded that the parties’ e-mail communications sufficed to establish a written contract within the meaning of G. L. c. 254. Contractors and construction material suppliers should still be diligent in getting formal contracts signed. However, this is a positive sign for the future use of electronic communications in negotiating construction contracts.

The case is Clean Properties, Inc. v. Riselli (Salinger, J.) (Middlesex Superior Court) (Docket No. MICV2014-04742) (June 18, 2014).