Prompt Payment Act
Federal and state laws requiring payment to flow down the contracting chain within specific deadlines, from owner to general contractor after invoice approval, and from the GC to subcontractors after the GC itself gets paid, with interest penalties attached for late payment.
Why it matters
The penalty for missing the deadline is automatic interest, not something a subcontractor has to prove damages for, which makes a prompt payment claim one of the more straightforward remedies available when a GC sits on payment too long.
On a real project
A general contractor receives payment from the owner and, under the applicable prompt payment act, has a set number of days to pay its subcontractors their share before interest penalties start accruing automatically.
Who this matters most to
A Construction Accountant tracks payment deadlines against the prompt payment act's requirements, while a Contracts Administrator manages the underlying subcontract terms those deadlines apply to.
Where this goes wrong
A GC receives payment from the owner but sits on it for six weeks before paying a subcontractor, well past the prompt payment act's deadline. The subcontractor invokes the statute's interest penalty, a cost the GC could have avoided entirely just by paying on time.