N.Y. State Finance Law § 137: Bond to secure payment of certain claims arising from a public improvement; enforcement

§ 137. Bond to secure payment of certain claims arising from a public

improvement; enforcement. 1. In addition to other bond or bonds, if any,

required by law for the completion of a work specified in a contract for

the prosecution of a public improvement for the state of New York a

municipal corporation, a public benefit corporation or a commission

appointed pursuant to law, or in the absence of any such requirement,

the comptroller may or the other appropriate official, respectively,

shall nevertheless require prior to the approval of any such contract a

bond guaranteeing prompt payment of moneys due to all persons furnishing

labor or materials to the contractor or any subcontractors in the

prosecution of the work provided for in such contract. Whenever a

municipal corporation issues a permit subject to compliance with section

two hundred twenty of the labor law, such permittee or its contractor or

subcontractors furnishing workers shall post a payment bond subject to

this section. Provided, however, that all performance bonds and payment

bonds may, at the discretion of the head of the state agency, public

benefit corporation or commission, or his or her designee, be dispensed

with for the completion of a work specified in a contract for the

prosecution of a public improvement for the state of New York for which

bids are solicited where the aggregate amount of the contract is under

one hundred thousand dollars and provided further, that in a case where

the contract is not subject to the multiple contract award requirements

of section one hundred thirty-five of this article, such requirements

may be dispensed with where the head of the state agency, public benefit

corporation or commission finds it to be in the public interest and

where the aggregate amount of the contract awarded or to be awarded is

less than two hundred thousand dollars. Provided further, that in a case

where a performance or payment bond is dispensed with, twenty per centum

may be retained from each progress payment or estimate until the entire

contract work has been completed and accepted, at which time the head of

the state agency, public benefit corporation or commission shall,

pending the payment of the final estimate, pay not to exceed

seventy-five per centum of the amount of the retained percentage.

2. A copy of such payment bond shall be kept in the office of the head

of the department or bureau having charge of the public improvement in

connection with which the bond was given and a copy shall also be kept

in the office of the comptroller or other appropriate official; such

copies shall be open to public inspection.

3. Every person who has furnished labor or material, to the contractor

or to a subcontractor of the contractor, in the prosecution of the work

provided for in the contract and who has not been paid in full therefor

before the expiration of a period of ninety days after the day on which

the last of the labor was performed or material was furnished by him for

which the claim is made, shall have the right to sue on such payment

bond in his own name for the amount, or the balance thereof, unpaid at

the time of commencement of the action; provided, however, that a person

having a direct contractual relationship with a subcontractor of the

contractor furnishing the payment bond but no contractual relationship

express or implied with such contractor shall not have a right of action

upon the bond unless he shall have given written notice to such

contractor within one hundred twenty days from the date on which the

last of the labor was performed or the last of the material was

furnished, for which his claim is made, stating with substantial

accuracy the amount claimed and the name of the party to whom the

material was furnished or for whom the labor was performed. The notice

shall be served by delivering the same personally to the contractor or

by mailing the same by registered mail, postage prepaid, in an envelope

addressed to the contractor at any place where he maintains an office or

conducts his business or at his residence; provided, however, that where

such notice is actually received by the contractor by other means, such

notice shall be deemed sufficient.

4. (a) A payment bond required pursuant to this section may provide

that the place of trial of an action on the bond shall be in the county

in which the contract of the contractor who furnished the bond was to be

performed or if such contract was to be performed in more than one

county, then in any such county, and not elsewhere.

(b) Except as provided in section two hundred twenty-g of the labor

law, no action on a payment bond furnished pursuant to this section

shall be commenced after the expiration of one year from the date on

which the public improvement has been completed and accepted by the

public owner.

(c) In any action on a payment bond furnished pursuant to this

section, any judgment in favor of a subcontractor or material supplier

may include provision for the payment of interest upon the amount

recovered from the date when demand for payment was made pursuant to the

labor and material payment bond and provided further that the court may

determine and award reasonable attorney's fee to either party to such

action when, upon reviewing the entire record, it appears that either

the original claim or the defense interposed to such claim is without

substantial basis in fact or law.

5. (a) The expression "furnishes material" or other similar expression

wherever used in this section shall be deemed to include the reasonable

rental value for the period of actual use of machinery, tools or

equipment, and the value of compressed gases furnished for welding or

cutting, and the value of fuel and lubricants consumed by machinery

operating on the improvement, or by motor vehicles owned, operated or

controlled by the contractor or his subcontractors while engaged

exclusively in the transportation of materials to or from the

improvement for the purposes thereof.

(b) The expression "moneys due to persons furnishing labor to the

contractor or his subcontractors" includes all sums payable to or on

behalf of persons furnishing labor to the contractor or his

subcontractors, for wages, health, welfare, non-occupational disability,

retirement, vacation benefits, holiday pay, life insurance or other

benefits, payment of which is required pursuant to the labor law or by

the contract in connection with which the bond is furnished or by a

collective bargaining agreement between organized labor and the

contractor or subcontractor, and which are computed upon labor performed

in the prosecution of the contract. A trustee or other person authorized

to collect such payments shall have the right to sue on the payment bond

in his own name and subject to the same conditions as if he were the

person performing the labor upon which such sums are computed.