{"id":901002,"date":"2023-03-29T14:41:00","date_gmt":"2023-03-29T20:41:00","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=901002"},"modified":"2023-03-22T14:52:21","modified_gmt":"2023-03-22T20:52:21","slug":"pay-if-paid-clause-banned-virginia","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/","title":{"rendered":"Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors"},"content":{"rendered":"\n<p>Meghan Hunter Harrison | <a href=\"https:\/\/www.constructlaw.com\/2023\/03\/16\/virginia-bans-pay-if-paid-clauses-to-protect-construction-subcontractors\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Troutman Pepper<\/a><\/p>\n\n\n\n<p>Virginia has joined the ranks of states that <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-virginia-senate-bill-550\/\" target=\"_blank\" rel=\"noreferrer noopener\">ban \u201cpay-if-paid\u201d clauses<\/a>. Contingent payment clauses, like \u201cpay-if-paid\u201d and \u201cpay-when-paid\u201d clauses, protect contractors: A contractor need not pay its subcontractors or suppliers until the owner pays the contractor.<\/p>\n\n\n\n<p>A \u201cpay-<em>if<\/em>-paid\u201d clause conditions a subcontractor\u2019s&nbsp;<em>right<\/em>&nbsp;to payment on the owner paying the contractor. A \u201cpay-<em>when<\/em>-paid\u201d clause only conditions the&nbsp;<em>timing<\/em>&nbsp;of payment. Even if the owner does not pay the contractor, the contractor must pay the subcontractor within a \u201creasonable\u201d time after it performs. Virginia Senate Bill 550, which took effect on January 1, bans \u201cpay-if-paid\u201d clauses in both private contracts (Section 11-4.6) and public contracts (Section 2.2-4354).<\/p>\n\n\n\n<p><strong>Private Contracts<\/strong><\/p>\n\n\n\n<p>Section 11-4.6 of the bill requires higher-tier contractors to pay lower-tier subcontractors within the earlier of either: (1) 60 days from the satisfactory completion of the invoiced portion of work or (2) seven days after receiving amounts paid by the owner to the general contractor (or by the higher-tier contractor to the lower-tier contractor) for work performed by a subcontractor under the contract terms. It similarly requires owners to pay general contractors within 60 days of the receipt of an invoice following \u201csatisfactory completion of the invoiced portion of work.\u201d<\/p>\n\n\n\n<p>The Virginia Public Body Procurement Workgroup issued recommendations to enhance the clarity of Section 11-4.6. The workgroup suggested clarifying that the section only applies to construction contracts. The workgroup also advised using \u201creceipt of invoice\u201d to trigger payments instead of \u201csatisfactory completion of the portion of the work for which the subcontractor has invoiced.\u201d<\/p>\n\n\n\n<p><strong>Public Contracts<\/strong><\/p>\n\n\n\n<p>Section 2.2-4354 of the bill does not mandate a payment timeframe for public contracts, but Subsection (1) provides that such contracts must include a payment clause obligating contractors to be liable for the \u201centire amount owed\u201d to any subcontractor. The bill bans \u201cpay-if-paid\u201d clauses by stating that contracts may not make an owner\u2019s payment a condition precedent to a contractor paying a subcontractor.<\/p>\n\n\n\n<p>Here the workgroup suggested clarifying how Subsection (1)\u2019s language requiring that a contractor be liable for the \u201centire amount owed\u201d reconciles with Subsection (2)\u2019s language obligating a contractor to pay the subcontractor \u201cthe proportionate share of the total payment.\u201d This difference could give rise to litigation with contractors arguing they paid the \u201cproportionate share,\u201d while subcontractors argue they were not paid the \u201centire amount owed.\u201d<\/p>\n\n\n\n<p>The workgroup also suggested clarifying the timeframe in which a general contractor must pay a subcontractor. Lastly, Subsection (1) specifically applies to construction contracts; Subsection (2) does not. The workgroup recommended clarifying the type of contract to which each subsection applies.<\/p>\n\n\n\n<p>In light of Virginia Senate Bill 550 and the workgroup\u2019s recommendations (which may be adopted as early as March 2023), subcontractors, contractors, and owners should review their standard contract language. As of January 1, new contracts must comply with these provisions or risk being unenforceable.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Meghan Hunter Harrison | Troutman Pepper Virginia has joined the ranks of states that ban \u201cpay-if-paid\u201d clauses. Contingent payment clauses, like \u201cpay-if-paid\u201d and \u201cpay-when-paid\u201d clauses, protect contractors: A contractor need not pay its subcontractors or suppliers until the owner pays the contractor. A \u201cpay-if-paid\u201d clause conditions a subcontractor\u2019s&nbsp;right&nbsp;to payment on the owner paying the contractor.&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/\">Continue reading <span class=\"screen-reader-text\">Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,7568,11156,357],"class_list":["post-901002","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-pay-if-paid-clause","tag-pay-when-paid-clause","tag-virginia","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors - Advise &amp; Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Meghan Hunter Harrison | Troutman Pepper Virginia has joined the ranks of states that ban \u201cpay-if-paid\u201d clauses. Contingent payment clauses, like \u201cpay-if-paid\u201d and \u201cpay-when-paid\u201d clauses, protect contractors: A contractor need not pay its subcontractors or suppliers until the owner pays the contractor. A \u201cpay-if-paid\u201d clause conditions a subcontractor\u2019s&nbsp;right&nbsp;to payment on the owner paying the contractor.&hellip; Continue reading Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise &amp; Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2023-03-29T20:41:00+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Virginia Bans Pay-If-Paid Clauses to Protect Construction Subcontractors\",\"datePublished\":\"2023-03-29T20:41:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/pay-if-paid-clause-banned-virginia\/\"},\"wordCount\":512,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"Advise &amp; 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Contingent payment clauses, like \u201cpay-if-paid\u201d and \u201cpay-when-paid\u201d clauses, protect contractors: A contractor need not pay its subcontractors or suppliers until the owner pays the contractor. 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