Prompt Payment Act Trumps Forum Selection Clause

The New Jersey Prompt Payment Act ("PPA"), N.J.S.A. 2A:30A-1, et. seq., includes numerous provisions that protect contractors including, the ability to collect interest of prime plus 1% on overdue balances and the ability to suspend performance after seven-day written notice of non-payment.  In ERCO Interior Systems, Inc. v. National Commercial Builders, Inc., a New Jersey contractor sued a Kansas company for work that the contractor performed in New Jersey.  When the NJ contractor brought suit for non-payment, the Kansas company moved to dismiss the case on the basis that the contract has a forum selection clause mandating that any enforcement actions be brought in Kansas.  However, the Appellate Division held that due to the fact that the case involved the PPA, the forum selection clause was invalid.  Noting that forum selection clauses will not be enforced where such enforcement would violate the public policy of New Jersey, the Court found that there was a strong public policy behind the PPA and that the PPA claim, along with the other associated claims of breach of contract, etc. must all be litigated in New Jersey.  ERCO Interior Systems, Inc. v. National Commercial Builders, Inc.