SUBCONTRACTOR STRATEGIES FOR DEALING WITH A “PAY-IF-PAID” AND “PAY-WHEN-PAID” CLAUSES IN MARYLAND AND DC: Contract Interpretation, Prevention Doctrine, Mechanics’ Liens, Payment Bonds, Little Miller Act and Miller Act Claims.

COWIE & MOTT Construction Lawyers and Attorneys, SUBCONTRACTOR STRATEGIES FOR DEALING WITH A “PAY-IF-PAID” AND “PAY-WHEN-PAID” CLAUSES IN MARYLAND AND DC: Contract Interpretation, Prevention Doctrine, Mechanics’ Liens, Payment Bonds, Little Miller Act and Miller Act Claims.

This article discusses legal strategies for subcontractors dealing with a “pay-if-paid” and “pay-when-paid” clauses in payment disputes with contractors on Maryland and Washington DC construction projects. These legal strategies, discussed below, include Contract Interpretation, Prevention Doctrine, Mechanics’ Liens, Payment Bonds and Miller Act / Little Miller Act Claims.

Background: “Pay-if-Paid” and “Pay-when-Paid” Clauses

In a typical construction project, a general contractor relies on payment from the construction project owner as a source of funds to pay its subcontractors, who, in turn, pay sub-subcontractors and material suppliers down the line. With everything riding on the general contractor getting paid, it only makes sense that general contractors would include contractual provisions in their subcontracts that condition subcontractor payment on the general contractor first receiving payment from the project owner. These contractual provisions are known as “conditional payment clauses” and they fall into two categories: (1) “pay-when-paid” clauses; and (2) “pay-if-paid” clauses. These clauses attempt to condition a subcontractor’s right to receive payment on “when” or “if” the general contractor receives payment from the construction project owner.

“Pay-When-Paid” Clauses

“Pay-when-paid” clauses in a construction subcontract “concern the timing of payment by the general contractor, but do not relieve the general contractor of its contractual liability to [pay for work performed by] the subcontractor under the subcontract.” Young Electrical Contractors, Inc. v. Dustin Construction, Inc., 459 Md. 356, 363, 185 A.3d 170, 174 (2018) (hereinafter “Young Electrical”). The general contractor’s payment obligation is merely suspended until after it receives payment from the project owner. An example of a “pay-when paid” clause would be:

“General contractor shall pay subcontractor within five business days of general contractor’s receipt of payment from project owner.”

Courts interpret these provisions as requiring payment either within the time specified following receipt of payment from the project owner, or within a reasonable time if it turns out that payment from the project owner is delayed or never made at all. For example, a prolonged delay in payment could result from an on-going breach of contract dispute between general contractor and project owner. Alternatively, the project owner may seek bankruptcy protection and never pay. In either case, the general contractor’s receipt of payment from the project owner is not a condition precedent to paying subcontractor under a “pay-when paid” clause. Payment at some point is contemplated by the parties and courts will not allow the general contractor to indefinitely withhold payment.  The subcontractor must be paid “within a reasonable period of time” whether or not the general contractor is ultimately paid:

 “a “pay-when-paid” clause ‘is … construed as an unconditional promise to pay with the time of payment being postponed until the happening of a certain event, or for a reasonable period of time if it develops that such an event does not take place.’ ”

Young Electrical, 459 Md. at 365, 185 A.3d at 175 (citing the “leading case,” Thos. J. Dryer Co v. Bishop International Engineering Co., 303 F.2d 655, 659 (1962)).

“Pay-If-Paid“ Clauses

Unlike “pay-when-paid” clauses, “pay-if-paid” clauses do “make the project owner’s payment of the general contractor a condition precedent to the general contractor’s obligation to pay the subcontractor, and, thus, a “pay-if-paid” clause can relieve the general contractor of liability to pay the subcontractor, even if the subcontractor has fully performed its obligations under the subcontract.” Young Electrical, 459 Md. at 363, 185 A.3d at 174. A typical “pay-if-paid” clause reads as follows: 

“The general contractor will pay the subcontractor only if the general contractor is paid by the project owner for the subcontractor’s work. General contractor’s receipt of payment from the project owner is a condition precedent to general contractor’s obligation to make payment to the subcontractor.”

These pay-if-paid clauses require the subcontractor to assume the risk that the general contractor might not receive payment from the project owner. In some subcontracts, “pay-if-paid” clauses specifically state that the subcontractor “expressly assumes the risk of the project owner’s non-payment and the subcontract price includes that risk.”

From a general contractor’s perspective, a “pay-if-paid” clause is preferable in a payment dispute because it does not have to worry about paying its subcontractors if for some reason the owner refuses to pay for reasons beyond its control. From a subcontractor’s perspective, any clause conditioning payment other than on completion of subcontractor’s work, or portions thereof, is to be avoided. However, if payment is to be conditioned on the general contractor’s receipt of payment from the project owner, then a subcontractor is better off in a payment dispute if the clause is interpreted as a “pay-when paid” clause because it does not risk forfeiting its right to payment under the subcontract if  the owner fails to pays the general contractor.

Contract Negotiation

One way to avoid a “pay-if-paid” clause is simply to negotiate the terms of a subcontract that does not contain such a clause. Often, however, subcontractors lack bargaining power to negotiate the terms of a subcontract and are presented with a “take it or leave it” subcontract document. When a subcontractor agrees to conditional payment clause, it should consider/analyze the financial stability of the owner and the skill of the general contractor in order to assess the risk it is assuming. Additionally, the subcontractor should consider passing the clause down to its sub-subcontractors in its sub-subcontracts so they also assume the risk of the general contractor not being paid by the project owner.

Contract Interpretation

Another way to avoid the effects of a “pay-if-paid” clause in a payment dispute is to argue that the conditional payment clause should be construed as a “pay-when-paid” clause. The law of contract interpretation favors the “pay-when-paid” clause over the “pay-if-paid” clauses because the latter can result in a complete forfeiture of payment for work completed by a subcontractor. Young Electrical, 459 Md. at 366, 185 A.3d at 176. Courts are therefore reluctant to interpret a conditional payment clause as a “paid-if-paid” clause unless the contract language clearly indicates an intent that the subcontractor is to forfeit it’s right to be paid if the project owner fails to pay the general contractor:

“[conditional payment] provisions [in a subcontract] … are to be construed as timing provisions — pay-when-paid clauses — unless the contract language clearly indicates that the parties intend otherwise.” 

Young Electrical, 459 Md. at 368, 185 A.2d at 177.

If the language of the subcontract agreement contemplates that the subcontractor will ultimately be paid, it can be argued that a conditional payment provisions should be construed as a “pay-when-paid” clause. Any ambiguity or vagueness in the contractual language about parties’ intent that the subcontractor should forfeit its right to payment will also likely lead the court to interpret the provision as a “pay-when-paid” clause. The court may interpret against the drafting party or even look to parole evidence of the party’s intentions to determine the language used in the contract should be interpreted as a “pay-when-paid” clause as opposed to a “pay-if-paid” clause.

On the other hand, if payment by the owner is expressly stated to be a “condition precedent” to the contractor’s obligation to pay the subcontractor, then the contractual provision will likely be interpreted as a “pay-if-paid” clause. Young Electrical, 459 Md. 356, 185 A.3d at 177. (citing Gilbane Bldg. Co. v. Brisk Waterproofing Co., 86 Md. App. 21 (1991)). The Maryland Court of Special Appeals determined that the following contract language was to be interpreted as a “pay-if-paid” clause:

“[i]t is specifically understood that the payment to the [subcontractor] is dependent, as a condition precedent, upon the
[general contractor] receiving contract payments… from the owner….”

Gilbane Bldg. Co. v. Brisk Waterproofing Co., 86 Md. App. 21, 25 (1991) (“ Gilbane”).

The Court in Gilbane concluded that reference to owner payment as a “condition precedent” was sufficient terminology to shift the risk of owner insolvency to the subcontractor as a matter of objective contract interpretation. Gilbane, 86 Md. App. at 28. 

The Prevention Doctrine 

The prevention doctrine is a recognized principle of contract law under which a condition precedent to another party’s performance [payment by the project owner] may be waived or excused if that party has wrongfully prevented or hindered fulfillment of the condition precedent [payment by the project owner] . Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 725 (4th Cir. 2000)(“Moore Brothers”). Thus, if the general contractor takes actions that cause or materially contribute to the project owner’s delayed payment or failure to pay, then the condition of payment may be waived or excused under the prevention doctrine.  In such a case, the general contractor cannot relying on a “pay-if-paid” or “paid-when-paid” clause as a defense to the subcontractor’s payment claim. For example, the Fourth Circuit Court of Appeals held that under the prevention doctrine, a general contractor could not rely on a “pay-when-paid” clause as a defense to a subcontractor’s payment claim because the general contractor had hindered the fulfillment of payment when it intentionally failed to disclose to the owner’s lender, as contractually required, that additional work had to be performed by the subcontractor. As a result, the lender did not provide additional financing and the owner did not have the funds to pay the general contractor for the additional work. Moore Brothers, 207 F.3d at 725.

Both Maryland and the District of Columbia recognize the prevention doctrine, WSC/2005 LLC v. Trio Ventures Assoc., Maryland Court of Special Appeals, No. 75, September Term 2017 (decided July 30, 2018), cert. granted on other grounds, and Shear v. Nat’l Rifle Ass’n of Am., 606 F.2d 1251 (D.C. Cir. 1979)(“ Shear’). The doctrine it is generally considered to be one aspect of the “covenant of good faith and fair dealing” implied in every contract in Maryland and the District of Columbia. The rational being that if a general contractor is the cause of the project owner’s failure to make payment, it cannot fairly take advantage of that failure as an excuse not to pay a subcontractor. SeeIn re Estate of Drake, 4 A.3d 450, 454 (D.C. 2010); Aronoff v. Lenkin Co., 618 A.2d 669, 682-83 (D.C. 1992); Reiman v. International Hospitality Group, 558 A.2d 1128, 1132-34 (D.C. 1989); Shear, 606 F.2d at 1255.

In order for the prevention doctrine to apply, the owners refusal to pay must be the result of “wrongful” conduct on the part of the general contractor, “as opposed to some less culpable form of fault.” Mendoza vCOMSAT Corp., 201 F.3d 626, 631 (5th Cir. 2000) (applying DC law and citing Reiman v. International Hospitality Group, 558 A.2d 1128, 1132 (D.C.1989) and Dale Denton Real Estate, Inc. v. Fitzgerald, 635 A.2d 925, 928 (D.C.1993) ); District-Realty Title Ins. Corp. v. Ensmann, 767 F.2d 1018, 1023 (D.C. Cir. 1985). Additionally, the conduct in question must not be expressly authorized or implicitly permissible under the terms of the contract between the general contractor and the project owner. Shear,606 F.2d at 1256. If the contract explicitly or implicitly permits a general contractor to take some action, and that action, in turn, prevents or hinders the project owner’s payment, the prevention doctrine will not prevent the general contractor from enforcing a “pay-if-paid” and “paid-when-paid” clause in a payment dispute. King King, Chtd v. Harbert Intern., Inc., 436 F. Supp 2d 3, 11 (D.D.C. 2006). In other words, if the contract authorizes the conduct, it is difficult to argue that it is wrongful.

The wrongful conduct preventing payment need not be a deliberate act in order to invoke the prevention doctrine. For example, a recent case, decided under Pennsylvania law, delays in the completion of a construction project on the part of a general contractor persisted over 2 years . Connelly Constr. Corp. v. Travelers Cas. & Surety Co. of Am., 2018 WL 3549281 (E.D. Pa. July 24, 2018).  The project owner expressed “serious concerns” regarding these delays and “unacceptable performance” on the general contractor’s part and withheld final payment. The general contractor, in turn, refused to pay a subcontractor for completed work on grounds that there was a “pay-if-paid” clause in the subcontract. The general contractor argued that the prevention doctrine did not apply to its delays in completing the project being the cause of the owner’s refusal to pay because the delays were not “deliberate”, but rather merely “inadvertent.” The court rejected this argument, holding that the general contractor was barred by the prevention doctrine from relying on the pay-if-paid clause, whether or not its delays were deliberate or inadvertent. In reaching this conclusion, the court noted that he general contractor had “complete control” over the work such that one could reasonably conclude it contributed to delays and, therefore, to its own non-payment.

The prevention doctrine does not require a subcontractor prove that payment by the owner would have occurred “but for” the wrongful conduct of the promisor; instead it only requires that the general contractors conduct have “contributed materially” to the non-occurrence of payment. Moore Brothers, 207 F.3d at 725;In re Estate of Drake, 4 A.3d 450, 454 (D.C. 2010) (“The prevention doctrine only requires the non-occurrence to be ‘fairly of attributable to the [general contractor’s] own conduct’”).

Mechanics’ Lien and Payment Bond Claims on Private Construction Projects

In the event of a payment dispute, conditional payment clauses do not prevent subcontractors from pursuing mechanics’ lien or payment bond claims arising out of private construction contracts. Thus, even if a subcontractor’s contractual claim for payment against the general contractor is barred by a conditional “pay-if-paid” or a “pay-when-paid” clause, an unpaid subcontractor can still pursue a mechanics’ lien claim against the project owner’s property. Likewise, these conditional payment clauses do not prevent an unpaid subcontractor from bringing a claim against the surety of any payment bond that the general contractor was required to purchase in connection with being awarded the construction project. A mechanics’ lien allows a subcontractor to establish and/or enforce a lien (in the amount it is owed) on the property where the construction project is located. See articles: Mechanics’ liens in Maryland and Mechanic’s liens in the District of Columbia. On some larger private projects, owners require general contractors to provide a payment bond, purchased from a surety company who agrees to pay subcontractors that are rightfully owed if the general contractor fails to do so. The bond creates a source of funds so that, in a payment dispute, the unpaid subcontractors can bypass the general contractor and asserted a payment bond claim directly against the general contractor’s surety.

Both mechanics’ lien and bond claims have strict timelines that must be met for giving notice and/or filing a claim. In many cases, those claims would be time barred if the subcontractors were required to wait to bring them under a “paid-if-paid” or “pay-when-paid” conditional payment clause. In some states, it has been argued that a subcontractor should be barred from pursuing monies owed by means of a mechanics’ lien or payment bond claim if payment is not yet contractually due under by reason of a “paid-if-paid” clause its contract. This argument is not available in Maryland or the District of Columbia because both jurisdictions have similar “Prompt Payment” statutes that protect a subcontractor’s right to bring a mechanics’ lien or payment bond claim, even if a claim directly against the general contractor cannot be made by reason of a “paid-if-paid” or “pay-when-paid” conditional payment clause.

Maryland’s Prompt Payment statute reads, in pertinent part, as follows:

“ (b)      A provision in … [a] contract between a [general] contractor and a subcontractor that is related to construction, alteration, or repair of a building, structure, or improvement and that conditions payment to the subcontractor on receipt by the [general] contractor of payment from the owner or any other third party [e.g., “paid-if-paid” clause] may not abrogate or waive the right of the subcontractor to:
            (1)      Claim a mechanics’ lien; or
            (2)      Sue on a contractor’s bond.
      (c)      Any provision of a contract made in violation of this section is void as against the public policy of this State.”

Maryland Real Property Article, § 9–113 (b) (c).

The District of Columbia’s Prompt Payment statute reads in part as follows:

“(b) … conditions of payment to the subcontractor on receipt by the [general] contractor of payment from the owner [e.g., “pay-if-paid” clause] may not abrogate or waive the right of the subcontractor to:
(1) Claim a mechanics’ lien; or
(2) Sue on a contractor’s bond.
(c) Any provision of a contract made in violation of subsection (b) of this section is void as against the public policy of the District.”

D.C. Code § 27-134 (b)(c).

Thus, while “paid-if-paid” or “pay-when-paid” conditional payment clauses may be enforceable to defend against a subcontractor ‘s contractual claim for payment against the general contractor, those clauses do not provide a defense to a subcontractor’s mechanics’ lien or payment bond claim against the owner of the construction project or the general contractor’s surety. Even if the general contractor were to include a provision in the subcontract that makes payment by the owner a condition precedent to the subcontractor’s right to bring a mechanics’ lien or payment bond claim, such a provision would be “void” and unenforceable in Maryland and Washington DC under these “prompt payment” statutes.

Federal Miller Act Claims on Federal Construction Projects

On federal projects, “paid-if-paid” and “pay-when-paid” conditional payment clauses cannot be relied upon to prevent a subcontractor on a federal construction project from pursuing a federal Miller Act claim against a payment bond.

The Miller Act creates a statutory procedure designed to protect subcontractors and suppliers on certain federal construction projects by requiring general contractors to provide a payment bond, typically purchased from a surety company, as security so that a subcontractor on the federally funded project has an additional source of payment if the general contractor fails or is unable to pay. The federal payment bond claim procedure afforded by the Miller Act is important for subcontractors because, in contrast to a private construction project, public property belonging to the federal government is not subject to a mechanics’ lien as an alternative means of securing payment if the general contractor defaults. To fill this gap, the Miller Act is intended to provide aggrieved subcontractors with a mechanism for promptly recovering compensation when the general contractor fails or refuses to pay for completed work. See United States v. Zurich Am. Ins. Co., 99 F. Supp. 3d 543, 548 (E.D. Pa. 2015).

There is a short time frame within which a subcontractor must take action to seek recovery on a Miller Act payment bond if it does not receive payment from the general contractor, commencing ninety days after the subcontractor has completed its work and extending for a period one-year. 40 U.S.C. § 3133(b)(1),(4). If a conditional payment clause could be used by a general contractor’s surety as grounds for delaying a subcontractor’s federal miller act payment bond claim, the subcontractor’s rights to prompt payment under the under the Miller Act would be defeated and possibly time barred. “[F]ederal courts that have addressed the issue have unanimously held that a surety is not entitled to the benefits of [the general contractor’s] pay-when-paid or pay-if-paid clause” because delaying a subcontractor’s right to seek prompt payment under the Miller Act based on a private subcontract agreement would defeat the purpose of the statute.  U.S. ex. rel. Tusco, Inc. v. Clark Construction Group, LLC, 152885, 2016 WL 4269078 (D. Md. Aug. 15, 2016) (citing U.S. ex. rel. Walton Tech., Inc. v. Weststar Eng’g, Inc., 290 F.3d 1199 (9th Cir. 2002)(“Walton Tech.”); U.S. ex. rel. T.M.S. Mech. Contractors, Inc. v. Millers Mut. Fire Ins. Co. of Texas, 942 F.2d 946 (5th Cir. 1991); U.S. ex rel. Straightline Corp. v. Am. Cas. Co. of Reading, PA, CIV.A. 5:06-00011, 2007 WL 2050323 (N.D. W. Va. July 12, 2007); U.S. ex. rel. DDC Interiors, Inc. v. Dawson Const. Co., 895 F. Supp. 270 (D. Colo. 1995)(“ DDC Interiors”) ; U.S. ex. rel. Ackerman v. Holloway Co., 126 F. Supp. 347 (D.N.M. 1954)).

On the other hand, if a subcontractor enters into a subcontract in which it voluntarily agrees to waive its right to bring a Miller Act payment bond claim, “federal courts have … held that a surety may … enforce a [“paid-if-paid” or “pay-when-paid”] conditional payment clause … in the subcontract.”  U.S. ex. rel. Tusco, Inc. v. Clark Construction Group, LLC, 152885, 2016 WL 4269078 (D. Md. Aug. 15, 2016) (citing Walton Tech., 290 F.3d at 1208-09; DDC Interiors, 895 F. Supp. at 272). However, the waiver of Miller Act rights in the subcontract must be “clear and explicit.” Id. “At a minimum, an effective waiver of Miller Act rights must include mention of the Miller Act and unambiguously express intention to waive the rights provided by it.” DDC Interiors, 895 F. Supp. at 274. A a typical “paid-if-paid” or “pay-when-paid” clause standing alone does not mention the Miller Act and therefore cannot be interpreted as a clear and explicit waiver of the subcontractor’s Miller Act rights. See e.g., Walton Tech., 290 F.3d 1199 and DDC Interiors, 895 F. Supp. 270 where the courts found that a “pay-if-paid clauses contained in a subcontract did not constitute a waiver of the subcontractor’s Miller Act rights and thus could not be enforced by surety as a defense to a bond claim.

Thus, although conditional payment clauses may allow a general contractor to delay or discharge its obligation to pay a subcontractor, such clauses cannot be relied upon to prevent a subcontractor on a federal construction project from pursuing a federal Miller Act claim against a payment bond, absent a valid waiver of Miller Act rights..

Little Miller Act Claims on State and Local Government Construction Projects

Conditional payment provisions cannot prevent subcontractors from bringing so called “Little Miller Act” claims arising out of public projects in Maryland or the District of Columbia.

Both Maryland and the District of Columbia have their own statutes fashioned closely after the federal Miller Act referred to, respectively, as “Maryland’s Little Miller Act” (Maryland State Finance and Procurement Article §§ 17-101 – 17-111) and “District of Columbia’s Little Miller Act” ( DC Code §§ 2-201.01- § 2-201.03, and § 2-201.11). Like the federal Miller Act, these Little Miller Acts require general contractors on certain public construction projects performed for State and local government in Maryland and the District of Columbia to purchase payment bonds as part of a statutory claim procedure to provide aggrieved subcontractors with “a mechanism for promptly recovering compensation” when a general contractor fails or refuses to pay for completed work. See United States v. Zurich Am. Ins. Co., 99 F. Supp. 3d 543, 548 (E.D. Pa. 2015).

Maryland’s Little Miller Act

Maryland’s Little Miller Act contains a specific provision that protects a subcontractor’s right in a payment dispute to bring a bond claim even it is otherwise barred from pursuing a claim directly against a general contractor by reason of a conditional payment clause, such as a “paid-if-paid” or a “pay-when-paid” clause:

“(d)      (1)      [A subcontract or sub-subcontract]  ….  may not waive or require [a subcontractor or sub-subcontractor] … to waive the right to sue on [a] payment [bond] under this section.

            (2)      [A subcontract or sub-subcontract]  … that conditions payment to the [subcontractor or sub-subcontractor] on receipt of payment … from a public body or other third party [e.g.,“paid-if-paid” or a “pay-when-paid” clause], may not abrogate or waive the right of [a subcontractor or sub-subcontractor]  … to sue on payment [bond] under this subtitle.

 (3)      A provision of a [subcontract or sub-subcontract]  …  made in violation of this subsection is void as against the public policy of the State.”

Maryland State finance and Procurement § 17-108.

Note also, that § 17-108 (d)(1) of the Maryland Little Miller Act prohibits use of a subcontract to waive a subcontractor’s right to make a payment bond claim under the act. Thus, while a conditional payment clause may prevent a subcontractor from suing an unpaid general contractor for non-payment, the subcontractor on a public project in Maryalnd may still recover by bringing a Little Miller Act payment bond claim against the general contractor’s surety . The surety may not rely upon a pay-if-paid clause in the subcontract as a defense to a payment bond claim.

DC’s Little Miller Act

Unlike Maryland’s version, the DC Little Miller Act does not contain an express statutory provision that overrides conditional payment clauses so as to protect a subcontractor’s right to bring a payment bond claim, even if a subcontractor’s agreement contains a conditional payment clause. Nonetheless, current case law makes it fairly certain that, if faced with the issue, Washington DC courts would follow federal case law discussed above  holding that a surety cannot defend against a subcontractor’s Miller Act bond claim on grounds that its subcontract contains a “paid-if-paid” or a “pay-when-paid” clause that permits the general contractor to delay or discharge its payment obligation.

First, DC Courts look to federal case law for guidance when interpreting DC’s Little Miller Act, because the DC Little Miller Act is very closely modeled after the FMA and also their exists little judicial analysis and interpretation of the DC Little Miller Act. Strittmatter Metro, LLC v. Fidelity and Deposit Co. of Md., 15-2114 2016 WL 5108021 (D.DC Sept. 20, 2016) (citing Castro v. Fidelity & Deposit Co. of Md., 39 F. Supp. 3d 1, 4-5 (D.D.C. 2014); Hartford Accident & Indem. Co. v. District of Columbia, 441 A.2d 969, 972 (D.C. 1982); Mariana v. Piracci Constr. Co., Inc., 405 F. Supp. 904 (D.D.C. 1975)).

Second, the United States District Court for the District of Colombia interpreting the DC’s Little Miller Act, cited with approval federal case law holding that “pay-when-paid” and “ay-if paid” clauses could not be used by a surety to foreclose or delay a subcontractor’s right to bring suit for payment under the Federal Miller Act against a general contractor’s surety. Strittmatter Metro, LLC v. Fidelity and Deposit Co. of Md., 15-2114 2016 WL 5108021 (D.DC Sept. 20, 2016). In that case a general contractor and its surety argued that a subcontractor was required to submit to a dispute resolution procedure incorporated into its subcontract before it could make a claim under the DC Little Miller Act. Relying in part on federal case law involving conditional payment clauses, the court rejected that argument and suggested that no provision in a subcontract, dispute resolution procedure or otherwise, could operate to delay a subcontractors right to a prompt payment remedy under the DC little Miller Act. Id.

Thus, while a conditional payment clause may prevent a subcontractor from suing an unpaid general contractor for non-payment, the subcontractor on a public project in the District of Columbia may still recover by bringing a Little Miller Acts payment bond claim against the general contractor’s surety, absent, possibly, a valid waiver of DC Little Miller Act rights in the subcontract.

Note about terminology: The District of Columbia ( Washington DC ) Mechanic’s lien Law uses the spelling “mechanic’s lien,” in the singular with an apostrophe before the “s” as in the lien of a single mechanic. The Maryland Mechanics’ lien law Uses the spelling “mechanics’ lien,” in the plural with an apostrophe after the “s” as in the lien of many mechanics. For purposes of this article, the author has adopted the spelling used in the the Maryland Mechanics Lien Act.

Note about the history of mechanics’ liens and the term “mechanic”: The original rationale in this country for adopting a mechanics’ lien law was to encourage builders to become involved in the construction of the District of Columbia. At that time, there were no automobiles and the term “mechanic” generally referred to builders and skilled tradesmen such as masons and carpenters. See article, Mechanic’s liens in the District of Columbia.

Note about the author: Nicholas D. Cowie is a construction law attorney and a partner in the construction law firm of COWIE & MOTT, P.A. Mr. Cowie practices construction law throughout the state of Maryland and the District of Columbia (Washington DC). Mr. Cowie established the “Construction Law “course at the University of Baltimore School of Law where he served as an adjunct professor of construction law. Mr. Cowie is highly regarded for his knowledge of construction law and represents clients with legal matters involving payment disputes, breach of contract, mechanics’ liens, payment bonds and other legal issues facing subcontractors, general contractors, project owners, design professionals, architects, engineers, construction managers and others on Maryland and Washington DC construction projects.

SUBCONTRACTOR STRATEGIES FOR DEALING WITH A “PAY-IF-PAID” AND “PAY-WHEN-PAID” CLAUSES IN MARYLAND AND DC: Contract Interpretation, Prevention Doctrine, Mechanics’ Liens, Payment Bonds, Little Miller Act and Miller Act Claims. Construction Law Attorneys

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