There are numerous ways to collect payment if you are a contractor owed on a construction project in Missouri. This article will tell you the five most commonly used methods of collecting when an owner or general contractor fails to pay on a project.
1. File a Mechanic’s Lien
The first, and perhaps most powerful, way of collecting on a Missouri construction project is by filing a mechanic’s lien statement. Most contractors will attempt to do this on their own. While a handful of the do-it-yourself liens that are filed may withstand attack, the majority of the mechanic’s liens filed pro se can easily be vitiated with the basic mechanic’s lien defenses.
See the article called 4 Defenses to Mechanic’s Liens in Missouri for more information on defending or properly filing a lien in Missouri.
2. Make a Bond Claim
Not all projects have bonds, but when a bond exists, it acts almost as insurance on the project. Public works projects almost always require a bond because a governmental entity is the owner on the project, and it would incredibly debilitate that governmental entity’s credibility and image if a contractor were able to lien up the government owned property.
For example, if an electrician performs work on the city hall building and is not paid for the work performed, the electrician would put a mechanic’s lien on city hall. In order to prevent
3. Make a Breach of Contract Claim
Even if your lien is invalid or you did not properly preserve your lien rights, you still likely have a claim for breach of contract on a construction project. Usually construction projects are of a significant enough magnitude to warrant a written contract.
However, occasionally contractors who are trying to keep the job informal or are “old school” will not sign a written contract that lays out the scope of the work and/or terms and conditions of the contractual agreement.
Are oral contracts enforceable on a construction project?
As a lawyer, a question that we are often asked is whether an oral contract on a construction project is enforceable. The general answer is yes. There are certain contracts that are required, by Missouri law, to be in writing.
4. Make a Quantum Meruit Claim
Quantum meruit basically means whatever is deserved or whatever it’s worth. It’s a claim based in equity as the policy behind a quantum meruit claim is to effectuate a fair outcome for the parties. For example, if work is performed for someone, it is only fair that the person receiving the work, pay the fair value for that work.
A quantum meruit claim is secondary to a contract claim. Some lawyers use it as a catch-all in the unlikely event that the court finds the contract invalid. Although there would no longer be a valid claim for breach of contract, fairness would dictate that the contractor should be paid in a manner commensurate with the amount of work performed.
5. Make a Missouri Prompt Payment Act Claim
Last but not least, and perhaps the biggest hammer in collecting on a construction law case: The Missouri Prompt Payment Act. This is one of the best ways to collect because it comes with interest at a rate of 18% per annum.
That means 1.5% per month. The statutory interest rate in Missouri is 9%, so this is double the regular statutory rate.
In addition to the elevated interest that a claimant can obtain, the claim also comes with reasonable attorney’s fees.
This is a major threat for a non-paying contractor or owner as they not only risk paying the full amount for the work performed, there is a significant amount of fees and interest racking up.
The Missouri Prompt Payment Act provides for certain amounts of time in which the contractor has to make payment of an undisputed amount.
If the owner or contractor does not make payment within that time period, interest will start to accrue (assuming the claimant has complied with all documentation submission requirements as well as the other contractual obligations.
See 3 Benefits the Missouri Prompt Payment Act Provides Contractors for a more detailed discussion of the Missouri Prompt Payment Act.
There are a number of ways to get paid on a construction project. You just learned about five different ways above.
The following is a recap of the different methods a contractor or subcontractor can use to get paid on a construction project:
- File a mechanic’s lien
- Make a bond claim
- Make a breach of contract claim
- Make a quantum meruit claim
- Make a Missouri Prompt Payment Act claim
You’ve learned the starting points for collecting, however there are certain procedural obstacles and technicalities when pursuing any of these claims. You would be well-advised to consult an attorney if you plan on utilizing any of these methods.
If you have more questions about collecting for work performed on a construction project, please feel free to contact our St. Louis construction law attorneys with questions.