Construction Litigation - Setoff and Prompt Payment Act

In an unpublished decision released today, the Appellate Division gave litigants two reminders for those engaged in construction litigation over unpaid services. The first reminder is directed to a defendant that assert a "setoff" amount is due and owing from the plaintiff. In that regard, the Court reminds that a setoff is an affirmative defense and that the defendant "bears the burden of proving it." In the case at bar, although the defendant sought a setoff amount from the plaintiff, it failed to produce evidence showing that such an amount was actually due. Here, for example, the defendant's trial witness claimed, during testimony, to not have the correct ledger with her while on the stand and thus could not competently testify to the large setoff amount sought.

The second reminder to litigants touches on the Prompt Payment Act ("PPA") which is found at N.J.S.A. § 2A:30A-2. The first subsection of that statute is applicable only with the owner, while the second subsection is applicable only with a subcontractor. In the former subsection "(a)" if an owner does not reject an invoice/work by a contractor it is "deemed approved." In subsection "(b)" if a contractor does not reject an invoice/work by a subcontractor it is NOT "deemed approved." This distinction is important when seeking payment for construction services because if an invoice and/or work performed is "approved" or "accepted" the lone argument between the parties will be financial in nature. (A&E Construction Co. v. Barrier Electric Co., Inc, et als.)