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.
Virginia General Contractors Not Protected from Pre-Work Claim Waivers
On March 2, 2018, the Governor approved an act of the Virginia General Assembly to make unenforceable pre-work waivers of lien rights […]
Adding Terms to a Government Contract without Saying So
Imagine an incredulous Contractor asking, “Show me in the Contract where it says I’m supposed to do X?” The Government Contracting Officer smugly answers, “even though the Contract doesn’t say so, you must do it anyway.” Is that even possible, when, how?
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If all apples are fruit, then why are all fruit not apples?
Forum Selection Can Be a Home-Court Advantage
I promise that any disputes between us will be argued at your house. Time passes and a dispute begins to brew. Now, I want to argue at my house, not at yours. You pay costs to argue at my house that you wouldn’t have incurred had I done as agreed. Should I have to reimburse your costs?
No-Damage-for-Delay and Owner-Related Dispute Clauses are No Defense to Surety Liability Under Miller Act
Prime Government Contractors - you may need to update your interim payment waivers.
Contractual Fairness is Whatever the Parties’ Agreed
When you know a current action or inaction is wrong, but you do not object, should you be allowed to object later?
Which Comes First – Specifications or Drawings?
Sometimes it's not better to ask for forgiveness after-the-fact.
Government Contract Claims: When Appeal is Rejection of Settlement
Without a reservation of rights, appealing a Contracting Officer’s Final Decision is a rejection of any offer of payment or settlement included therein. So, the contractor had only three options.
Linking Obligations
If you want to bind the subcontractor to the prime in every way the same as the prime is bound to the owner, then the incorporation clause of the subcontract should be: . . .
