The New Jersey Construction Lien Law's Contract Requirement - Construction Lawyers
What Kind of Writing is Sufficient to Ensure Protection Under the New Jersey Construction Lien Law?
In the course of our construction litigation practice, a common question we receive from new or prospective clients is whether they can enforce lien rights under the New Jersey Construction Lien Law in the absence of a formal contract. While there are a number of requirements that must be satisfied for a contractor or supplier to be entitled to the protection of the New Jersey Construction Lien Law, the existence of a proper signed, written contract is a common stumbling block. As construction lawyers, we encounter clients who have only a signed purchase order, an unsigned contract or estimate, or even no written contract at all. This post is aimed at clarifying what is sufficient to garner a contractor protection under the New Jersey Construction Lien Law in circumstances like these, when a formal written, signed contract is not available.
A Writing Must Be Signed and Specific to Warrant Protection Under the Lien Law
Under the prior version of New Jersey’s Construction Lien Law, a signed contract was a necessary prerequisite for a contractor’s filing of a lien. In 2011, however, the Construction Lien Law was amended to, among other things, provide a more expansive definition of “Contract”, which made it easier for contractors to satisfy the contract requirement under the Construction Lien Law. The relevant amended provision of the Construction Lien Law specifies as follows:
"Contract" means any agreement, or amendment thereto, in writing, signed by the party against whom the lien claim is asserted and evidencing the respective responsibilities of the contracting parties, including, but not limited to, price or other consideration to be paid, and a description of the benefit or improvement to the real property subject to a lien. In the case of a supplier, "contract" shall include a delivery or order slip referring to the site or project to which materials have been delivered or where they were used and signed by the party against whom the lien claim is asserted or that party's authorized agent. As referenced herein: the phrase "party against whom the lien claim is asserted" means the party in direct privity of contract with the party asserting the lien claim; and the term "signed" means a writing that bears a mark or symbol intended to authenticate it.
The definition of “Contract” under the current, amended New Jersey Construction Lien Law suggests that a purchase order will suffice to satisfy the contract requirement. However, as to any given purchase order, the classic construction lawyer answer, “it depends”, applies. As N.J.S.A. 2A:44A-2 specifies, a purchase order must be
[S]igned by the party against whom the lien claim is asserted and evidenc[e] the respective responsibilities of the contracting parties, including, but not limited to, price or other consideration to be paid, and a description of the benefit or improvement to the real property subject to a lien.
In other words, if a contractor seeking to file a lien possesses only a signed purchase order to satisfy the contract requirement, but that purchase order is so deficient in detail that it lacks an adequate description of the improvement being ordered, it may be deemed insufficient to constitute a written contract under the New Jersey Construction Lien Law. At a minimum, to for a construction lawyer to legitimately argue for protection under the Construction Lien Law, the purchase order relied upon must be on the letterhead of the contractor’s customer and set forth the work and the price.
To Avoid Forfeiting the Protection of the Construction Lien Law, a Signed Contract is the Best Practice
To date, there is no binding case law that addresses the outer boundaries of the amended definition of “Contract” under the New Jersey Construction Lien Law. As always, the best practice for suppliers or contractors is to document their agreements by obtaining a signed, written contract from their customers prior to performing work or supplying materials. In many cases, a simplified form contract will suffice, and if not ideal, is better than nothing. As almost any contractor who finds themselves in litigation without a contract or unable to collect payment from a customer due to the absence of a contract will tell you, spending a little time or money establishing a standard form of contract and practice of having a contract signed at the beginning of a job often pays off in the long run. A construction lawyer can assist with the drafting of such contracts.
New Jersey Construction Lien Lawyers
The Law Office of Bart J. Klein and its construction lawyers frequently counsel clients as to their rights and the availability of remedies under the New Jersey Construction Lien Law and in breach of contract situations. We welcome you to contact us for further information.