Ten Things to Consider When Drafting Construction Contracts Under New York Law

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Whether managing construction of a high-rise project in New York City, a power plant in India or a paper mill in Brazil, the legal disputes in any of those projects may be subject to resolution under New York law. While it is common for domestic construction-project disputes to be governed by the law where the project is located, on large, international projects as well as project-financed jobs, the contracts are often subject to New York law, where the financing parties and their legal counsel often are located. Drafters of such contracts, however, may want to be aware of restrictions by the New York legislature on the "freedom" to contract. Below are ten aspects to consider.

1. Governing Law. Provisions in private construction contracts that make contracts subject to the laws of another state are void and unenforceable. Section 757(1) of New York's General Business Law provides that a dispute arising from a construction contract must be resolved by New York state laws. The only exception to this prohibition is a contract with a material supplier.

2. Forum Selection. Provisions in private construction contracts that require dispute resolution in another state are void and unenforceable. Section 757(1) of the General Business Law provides that any litigation, arbitration or other dispute resolution arising from the contract must take place in New York state. The only exception to this prohibition is a contract with a material supplier.

3. Suspension of Work. Provisions that prohibit suspension of work under a private construction contract for nonpayment are void and unenforceable. Section 757(2) of the General Business Law provides that a construction contract cannot contain a provision "stating that a party to the contract cannot suspend performance under the contract if another party to the contract fails to make prompt payments under the contract."

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