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 identify and notify the sub of withholding as underlined below.
Per Va Code 11-4.6(C), for any withholding, the prime “shall notify the subcontractor, in writing, of his intention to withhold all or a part of the subcontractor’s payment with the reason for nonpayment, specifically identifying the contractual noncompliance, the dollar amount being withheld, and the lower-tier subcontractor responsible for the contractual noncompliance.”
Per Va Code 2.2-4354(1), (SB 550) Requires construction contracts awarded by state or local government agencies “as well as certain private construction contracts in which there is at least one general contractor and one subcontractor” to include a payment clause that obligates the contractors to be liable for the entire amount owed to any subcontractor with which it contracts. The bill provides that “a contractor shall not be liable for amounts otherwise reducible due to the subcontractor’s noncompliance with the terms of the contract; however, the contractor must notify the subcontractor in writing of the contractor’s intent to withhold all or a part of the subcontractor’s payment with the reason for such nonpayment.”
The legislature has not yet, but is working, to reconcile the specificity required by one code section that the other section more broadly outlines.
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
Are We There Yet?
Next time you close a deal, get the essential terms on paper and signed by all parties before it’s Miller Time.
Show Me the Money!
You told the guy to do the work, the work is done, and now it’s time for payment, right? But, you only told […]
