Since Y2K, sureties for federal projects in Virginia have been unable to defend against bond lawsuits by asserting pay-if-paid or pay-when paid clauses. Now, sureties are also unable to rely upon no-damage-for-delay (ND4D) and owner-related disputes clauses.
Recently, the Federal District Court for the Eastern District of Virginia held that a Prime’s Surety could not use the ND4D clause to defend against a Sub’s Miller Act lawsuit. Neither was the Sub required to wait until resolution of delays that the Owner may have caused, despite an express subcontract provision requiring as much.
The Court held that “the subcontract cannot eliminate the right to payment altogether, or delay it, unless the subcontract does so in a manner consistent with the terms of the Miller Act.” The only consistent means of which this author knows, and which the Court endorsed, were interim payment waivers for work already performed. The Court likened ND4D clauses to prospective waivers, which the Court said are prohibited by the Miller Act (although no such language exists in the Act).
Roads & Bridges
Where Does the Buck Stop?
Jon is a monthly contributor to Roads & Bridges magazine. He has been writing the law section for the magazine since January 2020. The link below will take you directly to the Roads & Bridges […]
Pay-If-Paid Unenforceable in Virginia Starting Jan. 1, 2023
As of Jan. 1, 2023, pay-if-paid clauses are unenforceable, regardless of whether a surety/payment bond claim is involved. This is only for subcontracts created on/after 1/1/23.
Also for subcontracts created on/after 1/1/23, the prime must specifically […]
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Claim Certified with Digital Signature Deemed OK
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Jonathan J. Straw
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