“Pay-if-Paid” No Defense to Miller Act Claim
Kegler Brown Construction Newsletter August 1, 2018
“Pay-if-paid” clauses are finding their way into subcontracts with increasing frequency. These clauses tie the subcontractor’s right to payment to the contractor’s receipt of payment from the owner.
Federal projects require the contractor to post a “Miller Act” payment bond guaranteeing timely payment to subcontractors and suppliers.
A recent case out of Virginia has answered the question of whether a “pay-if-paid” clause can defeat or delay a subcontractor’s recovery under a Miller Act payment bond. The Court – in a great victory for subcontractors nationwide – found that a subcontractor can still recover without delay under the bond. So, subcontractors on federal work will still be able to timely secure payment – even if the subcontract contained a “pay-if-paid” clause (United States on behalf of Kitchens To Go v. John C. Grimberg Co., Inc., 2017 WL 4698217 [E.D. Va. 2017]).