Georgia Construction Contracts Guide & FAQs

No, Georgia’s mechanics lien statute expressly prohibits the use of so-called “no-lien clauses” under OCGA §44-14-366(b):

A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services, or materials. Any purported waiver or release of lien or bond claim or of this Code section executed or made in advance of furnishing of labor, services, or materials is null, void, and unenforceable.

For more on this, see: Our contract has a waiver of lien rights clause, what can I do? (Georgia)

No, there is no specific requirement that a claimant needs a written contract in order to have the ability to file a Georgia mechanics lien. Although it’s always recommended to get the agreement in writing.

• See: Property lien with no written contract in GA

Georgia allows both pay-if-paid and pay-when-paid clauses to be conditions precedent to payment – to effectively bar payment forever and shift the risk of nonpayment to the lower-tier contracting party – if the clauses are sufficiently explicit. Essentially treating such clauses as the same, making no distinction between the two.

Contract language stating that payment will be made only when payment is received from above to effectively bar payment forever. When the clauses are clear, the risk of nonpayment can be shifted on private projects. –US ex rel McKenney’s Inc. v. Gov’t Tech

This is a bit more muddied on public projects, while it seems that explicit risk-shifting clauses could work as conditions precedent to payment, there are some tricky determinations made by some courts. A Georgia case drew a distinction between whether the existence of the debt itself was conditional, or whether the debt existed and merely the payment was conditional. If the latter, the court did not allow payment to be withheld indefinitely. This seems to suggest that there is the possibility, depending on how a risk-shifting contract clause was written that a Georgia court could determine that a clause that didn’t explicitly specify that the existence of the debt itself is conditioned upon payment being received above, to work as a timing mechanism for a payment that must ultimately be made.

• For more information, see: Georgia Pay-if-Paid Clauses are Enforceable

Yes, a no-damages-for-delay clause is enforceable in Georgia as long as they are clear and unambiguous. However, the Georgia courts have carved out some exceptions to the enforceability of these clauses, such as delays that:

• Were not contemplated by the parties;
• Caused by the other party’s bad faith or willful, malicious, or grossly negligent conduct;
• Are so unreasonable, that it constitutes an intentional abandonment of the contract; or
• Results from the contractee’s breach of a fundamental obligation of the contract.

Yes, the timing and interest penalties may be modified by the agreement between the parties in Georgia.

The same Georgia prompt payment laws apply to both private and public contracts. Under these provisions, the property owner or public entity must release payment to the prime contractor within 15 days of receipt of an invoice or pay application. Once received, all other payments must be made down the payment chain within 10 days of receipt of payments from the higher tier. Lastly, any late payments will accrue interest at a rate of 1% per month.

However, OCGA §13-11-7(b) explicitly states that:

Nothing in this chapter shall prohibit owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated in this Code section, and in this event, these contractual provisions shall control.

Private projects

Yes. Although Georgia does have laws governing the ability to withhold retainage and the timing of its release, there is no statutory limit on the amount of retainage that can be withheld on private projects. Only that the amount withheld should be a “reasonable amount.” Therefore, the amount of retainage that can be withheld will be dictated by the terms of the agreement.

Public projects

Conversely, the amount of retainage that can be withheld on Georgia public works projects is strictly capped at no more than 10% of each progress payment. If the contractor is making satisfactory progress at the 50% completion mark, then no more retainage should be withheld from the remaining progress payments. The terms of the contract cannot increase the amount beyond 10%.

• For a full breakdown, see: Georgia Guide to Retainage on Public & Private Construction Projects

Generally speaking, there is nothing explicitly required to be included in a construction contract in Georgia. However, if the project is for the construction, repair, or improvement of certain types of residential projects, there are some requirements regarding warranties and a notice language regarding alleged construction defects.

Writtten warranty requirement

On all 1-2 family, residential projects valued over $2,500, the prime contractor must provide a copy of this written warranty attached to the contract, or separately. Under Ga. Comp. R. & Regs. §553-1-.01, the warranty should describe, at minimum:

• Covered work & activities;
• Covered exclusions;
• Standards for evaluating work & activities (set forth in the Residential Construction Performance Guidelines published by the NAHB);
• Term of warranty, including commencement date(s) or events;
• Claim procedures;
• Contractor response options (such as repair, replace, or compensate); &
• Assignable manufacturer warranties.

Failure to provide this written warranty can subject the contractor to fines and/or penalties from the Board for Residential and General Contractors.

Right to repair notice

This notice language regarding construction defects is required under OCGA §8-2-41, and should be included in any construction contract related to single-family house, duplex, or multifamily unit designed for residential use in which title to each individual residential unit is transferred to the owner under a condominium or cooperative system; or provided separately. The notice must be conspicuous and read as follows:

GEORGIA LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT OR OTHER ACTION FOR DEFECTIVE CONSTRUCTION AGAINST THE CONTRACTOR WHO CONSTRUCTED, IMPROVED, OR REPAIRED YOUR HOME. NINETY DAYS BEFORE YOU FILE YOUR LAWSUIT OR OTHER ACTION, YOU MUST SERVE ON THE CONTRACTOR A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE. UNDER THE LAW, A CONTRACTOR HAS THE OPPORTUNITY TO MAKE AN OFFER TO REPAIR OR PAY FOR THE DEFECTS OR BOTH. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY A CONTRACTOR. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER STATE LAW, AND FAILURE TO FOLLOW THEM MAY AFFECT YOUR ABILITY TO FILE A LAWSUIT OR OTHER ACTION.

The statute of limitations (deadline) to file a breach of contract claim for nonpayment in Georgia varies depending on if the contract was written or oral.

• An action for breach of a written contract must be brought within 6 years from the date of the breach. –OCGA §9-3-24
• Actions for a breach of an oral contract must be brought within 4 years from the date of the breach. –OCGA §9-3-26