On April 17, the California Court of Appeal decided Crosno Construction, Inc. v. Travelers Casualty & Surety Company of America,1 effectively narrowing the scope of enforceable “pay-when-paid” provisions in construction subcontracts to the extent the subcontractor seeks recovery against a general contractor’s payment bond surety. Although the Crosno case involved a public works project, the rationale and holding should apply with equal force to private works projects. Basing the bulk of its decision on the Wm. R. Clarke Corp. v. Safeco Insurance Co.2 case, the court found that an open-ended “pay-when-paid” provision in a subcontract is not enforceable against a subcontractor that seeks to recover on a public works payment bond claim. This article discusses the Crosno decision and the implications for contractors on both sides of the contract moving forward.
Continue Reading California Appeals Court Provides Guidance on ‘Pay-When-Paid’ Provisions in Construction Subcontracts

A.E. Rosen Elec. Co. v. Plank, LLC, No. 07862-7, 2019 BL 113951 (Sup. Ct. Mar. 01, 2019)

On March 1, 2019, the Supreme Court of New York, Albany County, granted a subcontractor’s motion for summary judgment on a payment dispute involving a “pay-when-paid” contract provision.

Defendant Plank, LLC (“Contractor”) entered into a construction contract with Dutch Village, LLC (“Owner”) to act as the general contractor for the construction of four apartment buildings (“Project”).  Thereafter, Contractor entered into a subcontract with Plaintiff A.E. Rosen Electrical, Inc. (“Subcontractor”) for electrical work on the Project.  After nine months of work on the Project, a payment dispute arose between the Owner and Contractor.  At that time, Contractor directed the Subcontractor to cease work on the Project.

Continue Reading New York Supreme Court Granted Summary Judgment for Subcontractor Where Contractor Attempted to Utilize Contractual “Pay-When-Paid” Provision to Unreasonably Withhold Payment from Subcontractor