Jay-Ton Construction Co. v. Bowen Construction Services, Inc.
62 Va. Cir. 414 | Portsmouth County Circuit Court | 2003
What This Case Means for Subcontractors
Jay-Ton Construction sued Bowen Construction for $96,050 owed under a subcontract for work on a K-Mart shopping center project that stopped due to K-Mart's bankruptcy. The court upheld a "pay-when-paid" clause in the subcontract, meaning Bowen didn't have to pay Jay-Ton until the owner (Portsmouth Associates) paid Bowen first. However, the court made clear that subcontractors aren't completely helpless—they can still sue if the prime contractor actively prevents the owner from paying or if the two companies are secretly owned by the same people.
Key Takeaways
- •Pay-when-paid clauses are legal and enforceable in Virginia construction contracts, so getting paid depends on the owner paying the prime contractor first
- •You cannot rely on a pay-when-paid clause to avoid payment if you (the prime contractor) actively interfere with the owner's ability to pay or if you and the subcontractor are commonly controlled
- •Review your subcontract language carefully before signing—know whether payment is tied to owner payment and understand your rights if the project stalls or the owner goes bankrupt
Payment from the Owner to Bowen is a condition precedent to Bowen's obligation to pay Jay-Ton.
Frequently Asked Question
If my subcontract has a pay-when-paid clause, am I stuck waiting forever if the owner doesn't pay?
Not completely. While pay-when-paid clauses are enforceable in Virginia, you can still pursue legal action if the prime contractor actively prevents the owner from paying you or if you discover the prime contractor and owner are controlled by the same entity. However, if the owner simply runs out of money or goes bankrupt, the clause generally protects the prime contractor from liability.
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