Capitol Steel Fabricators, Inc. v. Mega Constr. Co.
58 Cal. App. 4th 1049 | California Court of Appeal | 1997
What This Case Means for Subcontractors
Capitol Steel Fabricators, a subcontractor, sued its general contractor Mega Construction over a "pay-when-paid" clause in their subcontract for a public school construction project. The clause said Capitol would only get paid after Mega received payment from the school district. California's Court of Appeal ruled that pay-when-paid clauses are illegal and unenforceable because they strip subcontractors of their legal right to file liens and claim payment bonds. This decision protects subcontractors by ensuring they can't be forced to wait indefinitely for payment.
Key Takeaways
- •Pay-when-paid clauses are void in California—don't accept them in your subcontracts, even if the general contractor insists. You have the right to payment regardless of whether the GC gets paid.
- •You can still file a lien and pursue a payment bond claim even if your subcontract contains a pay-when-paid clause. These statutory rights cannot be waived away.
- •If a GC tries to enforce a pay-when-paid clause against you, cite this case immediately. It applies to both public and private construction projects in California.
Pay when paid provisions are unenforceable because they effect an impermissible indirect waiver of lien rights.
Frequently Asked Question
Can a general contractor make me wait for payment until they get paid by the owner?
No. California law prohibits "pay-when-paid" clauses that tie your payment to the GC receiving money from the owner. You have a legal right to payment on your own schedule, and you can file a lien or claim against the payment bond if you don't get paid. Any contract clause trying to prevent this is unenforceable.
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