South Carolina's Prompt Pay Act (Title 29, Chapter 6 of the SC Code) sets statutory deadlines for construction payments and penalties for missing them. It is one of the most heavily tested SC-specific topics on the commercial Business Management and Law exam, and it is also one of the most useful laws a working contractor can know. Here is what it requires.
This is an independent study aid, not affiliated with the SC Department of Labor, Licensing and Regulation (LLR), the Contractor's Licensing Board, or PSI. Verify every detail against the current SC Code before your test date or before relying on it on a job.
The two payment clocks
The owner must pay the contractor within 21 days of receiving a pay request. The contractor must pay the subcontractor within 7 days of receiving payment. Those two numbers, 21 and 7, are the heart of the Act. If you study in multiple states, keep them separate from other states' clocks (Georgia's, for example, are 15 and 10).
The interest rule and its catch
Late payments accrue interest at 1% per month, but only if a condition is met: the paying party must have been notified in writing of the statute at the time the payment was requested. No written notice, no statutory interest. Best practice: cite the statute on your invoices and pay applications so the notice requirement is always satisfied. This "only if" condition is a favorite exam trap, so memorize the pairing: 1% per month, written notice required.
When withholding is permitted
The Act does not force payment for bad work. Withholding is permitted on these grounds:
- Unsatisfactory job progress
- Defective construction that has not been remedied
- Disputed work
- Third-party claims filed, or reasonable evidence that one will be filed
- Failure to make timely payments for labor, equipment, and materials
- Damage to the owner or other project participants
- Reasonable evidence that the contract cannot be completed for the unpaid balance
- Reasonable retainage
"Reasonable retainage" is intentionally general on private contracts. The specific retainage number below applies only to state projects.
State-project retainage: 3.5%
On state construction contracts with progress payments based on estimated percent of completion, the agency may retain no more than 3.5% of each progress payment. Retained amounts are released in the final payment upon final completion. This comes from the OSE construction manual, Chapter 7, and it is a state-procurement rule, not a private-contract cap. Do not apply it to private jobs. That distinction is tested.
How this connects to the rest of the exam
Prompt pay sits inside the Estimating and Bidding content area, but it overlaps with Contracts and Agreements (pay-when-paid versus pay-if-paid clauses in subcontracts) and with Liens (what happens when payment never comes). The lien law post covers the 90-day filing and 180-day enforcement deadlines that pick up where prompt pay leaves off, and the sample questions include prompt-pay items to drill. For the full exam picture, see the exam overview.
Try the free practice quiz
Payment timing questions are quick points if you know the numbers. Take the free 12-question South Carolina Commercial Business and Law practice quiz, the scored version with email results, so you can see exactly which topics need work. Start the free quiz
The South Carolina Commercial Business Law Study Guide covers the Prompt Pay Act and all eleven content areas with 150 weighted practice questions.