Home > Uncategorized > Paid when Paid. part two, an American view

Paid when Paid. part two, an American view

It would appear that the “paid when paid” clause has been tested across various states in the USA with differing results

This is quoted from a good piece by Hellmuth and Johnson in Minneapolis

Courts are split on whether the pay-when-paid clause is enforceable. The following states have ruled that these clauses (or certain variations of them) are valid, and that they shift the risk of owner nonpayment to the subcontractor: Arizona, Colorado, Georgia, Florida, Illinois, Michigan and Maryland.

>In contrast, California and New York have totally abolished the pay-when-paid clause. In other states, the enforceability of these provisions remains unclear, but the courts have tended to invalidate them. The following states do not appear to have a steadfast rule on the issue, but tend to disfavor them and have previously invalidated pay-when-paid clauses on technical or other grounds: Alabama, Connecticut, Louisiana, Massachusetts, Missouri, Pennsylvania, Tennessee and Washington, D.C. The Federal First and Fourth Circuit Courts of Appeals have also invalidated these types of provisions for various reason

This does date back to 2002 and maybe there have been some subsequent developments. South and North Carolina seemingly take the New York view whereas Virginia does not vary from the precise terms of the contract.

Quite a reminder of the substantial legal variations across different states

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