Additional Rights of Prime Contractors and Remote Contractors — Reasonable Assurances

1. Law
2. Tennessee Code
3. Property
4. Prompt Pay Act
5. Remedies for Delinquent Payment or Nonpayment
6. Additional Rights of Prime Contractors and Remote Contractors — Reasonable Assurances

1. In addition to any rights provided for under any contract:
   1. Prior to visible commencement of operations, and upon written request by a prime contractor, the owner shall furnish a prime contractor reasonable evidence the owner has procured a loan, which may be secured by a mortgage or other encumbrance, or has otherwise made financial arrangements sufficient to make all payments in accordance with the contract;
   2. After visible commencement of operations, a prime contractor or a remote contractor may, upon the owner's failure to make payments as required by the written contract, provide notice in accordance with § 66-34-602(a). Included within the notice, a prime contractor or remote contractor may request that the owner provide reasonable evidence that the owner has made financial arrangements sufficient to fulfill its obligation to make all payments in accordance with the written contract;
   3. An owner shall provide a response to a demand for reasonable assurances within ten (10) days of receipt of the request that:
      1. Provides reasonable evidence that the owner has made financial arrangements sufficient to fulfill the owner's obligation to make all payments in accordance with the written contract, including the information set forth in § 66-34-104(d); or
      2. Provides adequate legal reasons for the owner's failure to make payment of the sums owing to the requesting party;
   4. If an owner responds to a demand for adequate assurance with reasonable evidence that the owner has made financial arrangements sufficient to fulfill the owner's obligation to make all payments in accordance with the written contract, then the owner shall not materially vary the owner's financial arrangements from those disclosed under this section without prior notice to the prime contractor or remote contractor; and
   5. A demand for reasonable assurances may be sent separately or as part of any notice of nonpayment, notice pursuant to § 66-34-602(a), or other notice required or permitted under the contract, and may be in substantially the following form:

      [Prime contractor or remote contractor] furnished labor, materials, or services in furtherance of improvements to real property located at [property description] pursuant to its written contract with [owner, prime contractor, or remote contractor]. As of the date of this letter, [owner, prime contractor, or remote contractor] owes [prime contractor or remote contractor] the sum of [amount past due], which is past due or for which [prime contractor or remote contractor] asserts it has not been paid from [owner]. Such amounts were due on or before [insert due date] pursuant to the written contract between the parties. Pursuant to T.C.A. §66-34-603, [prime contractor or remote contractor] demands [owner] furnish reasonable evidence that [owner] has made financial arrangements sufficient to fulfill its obligation to make all payments in accordance with the written contract or setting forth adequate legal reasons for your failure to make payment, within ten (10) days of your receipt of this letter.

2. This section may not be waived by contract.
3. This section does not apply to the state and any department, board, or agency thereof, including the University of Tennessee; counties and municipalities and all departments, boards, or agencies thereof, including all school and education boards; and any other subdivision of this state.

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