MidAmerica Construction Management, Inc. v. MasTec North America, Inc.
436 F.3d 1257 | Court of Appeals for the Tenth Circuit | 2006
What This Case Means for Subcontractors
MidAmerica, a subcontractor, sued MasTec and Renegade for refusing to pay for completed work. The contract stated all payments were "expressly contingent upon receipt of payment from Owner." The court upheld this "pay-if-paid" clause as enforceable under Texas and New Mexico law, meaning the general contractor doesn't have to pay the subcontractor until the owner pays the general contractor first. This ruling protects contractors' cash flow but shifts payment risk to subcontractors.
Key Takeaways
- •Watch for "expressly contingent upon" language in your contract—this creates a pay-if-paid clause that makes owner payment a condition of your payment, not just a timing issue.
- •Pay-if-paid clauses are enforceable in Texas and New Mexico, so you cannot force payment if the owner hasn't paid the general contractor, even if you completed your work.
- •Negotiate to change pay-if-paid to "pay-when-paid" (which only delays payment) or require the contractor to guarantee payment regardless of owner payment status.
All payments to Subcontractor by Contractor are expressly contingent upon receipt of payment from Owner.
Frequently Asked Question
If my contract says payments are 'expressly contingent upon' owner payment, can the contractor refuse to pay me?
Yes. This language creates an enforceable pay-if-paid clause under Texas and New Mexico law. The contractor's obligation to pay you is conditioned on the owner paying them first. You cannot force payment even if you completed your work, unless the owner fails to pay due to the contractor's breach or fraud.
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