Insights
Pay-if-Paid Terms in Subcontracts: Love, Hate & the Transtar Decision
By James T. Dixon on March 18, 2015
As written in the March 2015 Properties Northeast Ohio's Monthly Magazine
By, James T. Dixon, Partner, Brouse McDowell, LPA
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By, James T. Dixon, Partner, Brouse McDowell, LPA
The Ohio Supreme Court recently issued its much-anticipated ruling in Transtar Elec., Inc. v. A.E.M. Elec., Servs. Corp., 2014-Ohio-3095. The often-discussed case is popular due to the impact of decision. Pay-if-paid provisions affect the bottom line directly and inversely, for contractors and subcontractors. Thus, contractors love them and subcontractors hate them. Because the Transtar decision made enforcement of pay-if-paid provisions much easier, that decision will be viewed the same way.
By agreeing to a pay-if-paid provision, the subcontractor agrees that it will only be paid for its work if the owner pays the contractor for that work. Thus, a pay-if-paid provision can be one of the most effective riskshifting provisions in a subcontract. Such language is often included in progress payment, final payment and claim liquidation provisions.
By agreeing to a pay-if-paid provision, the subcontractor agrees that it will only be paid for its work if the owner pays the contractor for that work. Thus, a pay-if-paid provision can be one of the most effective riskshifting provisions in a subcontract. Such language is often included in progress payment, final payment and claim liquidation provisions.
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