Evans, Mechwart, Hambleton & Tilton, Inc. v. Triad Architects, Ltd.
196 Ohio App. 3d 784 | Ohio Court of Appeals | 2011
What This Case Means for Subcontractors
EMH & T, a civil engineering subcontractor, sued Triad Architects for payment under two contracts containing pay-when-paid clauses. The contracts stated the architect would pay the subcontractor only after the owner paid the architect. When the owner didn't pay, Triad refused to pay EMH & T. Ohio's Court of Appeals ruled that pay-when-paid clauses are timing mechanisms, not excuses to avoid payment entirely. The contractor must pay the subcontractor within a reasonable time regardless of whether the owner has paid.
Key Takeaways
- •Pay-when-paid clauses don't eliminate your right to payment—they just delay when payment is due. The contractor still owes you money.
- •If the contractor hasn't received owner payment, they must still pay you within a reasonable time. You're not stuck waiting indefinitely.
- •Document everything: track when work was completed, when invoices were submitted, and when the contractor received owner payments. This proves what 'reasonable time' means.
A pay-when-paid provision serves as a timing mechanism, and not a condition precedent, for payment.
Frequently Asked Question
If my contract has a pay-when-paid clause and the owner hasn't paid the contractor, do I still have to wait for my money?
No. A pay-when-paid clause only delays when payment is due—it doesn't eliminate your right to be paid. The contractor must pay you within a reasonable time even if the owner hasn't paid them yet. You can't be left hanging indefinitely while the contractor waits for the owner.
Related Cases
Green International, Inc. v. Solis
No-damages-for-delay clauses in construction contracts need not meet the conspicuousness requirement established in Dresser for exculpatory negligence clauses, and such clauses are enforceable to bar delay damages absent specific exceptions.
Associated Indemnity Corp. v. CAT Contracting, Inc.
A surety does not owe a common law duty of good faith to its principal, but good faith is a contractual condition precedent to indemnification, requiring proof of improper motive or willful ignorance rather than mere negligence.
Rocor International, Inc. v. National Union Fire Insurance Co. of Pittsburgh
An insured may assert an article 21.21 claim against its excess liability carrier for unfair claim settlement practices, but liability requires proof of a proper settlement demand within policy limits that an ordinarily prudent insurer would accept.
EBC, Inc. v. Clark Building System, Inc.
A supplier cannot enforce a payment obligation against a project owner based on a letter offering optional direct payment arrangements, where the supplier's own deposition testimony demonstrates it never understood the letter as a binding contract.
Sage Street Associates v. Northdale Construction Co.
Texas Constitution's usury provision applies only to lending transactions, not to judicially-awarded prejudgment interest, which derives from court order rather than commercial agreement.
Lenape Resources Corp. v. Tennessee Gas Pipeline Co.
Section 2.306 of the UCC does not apply to take-or-pay gas contracts where parties have specified quantity as a determinable amount (85% of delivery capacity), and good faith obligations remain applicable to increases in delivery capacity.