Suppliers of construction materials are often utilized by contractors on multiple, contemporaneous projects. In such circumstances, it is not always clear to which project a supplier should apply payments by a specific contractor, particularly absent specific direction from the contractor and/or diligent record-keeping by all parties. Critically, as demonstrated by the recent appellate decision in L&W Supply Corp. v. DeSilva, 2012 N.J. Super. LEXIS 189 (App. Div. Dec. 19, 2012), a supplier’s failure to take appropriate steps to ensure that payments are accurately applied to the correct project can have significant, adverse consequences on the ability of the supplier to subsequently enforce its rights under New Jersey’s Construction Lien Law, N.J.S.A. § 2A:44A-1, et seq.

As a general matter, "a creditor who is owed more than one debt by a debtor may apply the payments to the debtor’s account in any manner it chooses so long as the debtor has not issued specific directions to the contrary." Craft v. Stevenson Lumber Yard, 179 N.J. 56, 72 (2004). This common-law "payment application rule," however, is not absolute, and does not apply in the context of construction lien claims. Indeed, as the New Jersey Supreme Court held in Craft, the Construction Lien Law negates the payment application rule and imposes an obligation on a third-party creditor to specifically apply payment on the accounts from which they were derived if the creditor wishes to file a construction lien claim. Specifically, the court stated:

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