Pyramid Constructors, L.L.P. v. Sunbelt Controls, Inc.
Texas Court of Appeals, 7th District (Amarillo) | 2005
What This Case Means for Subcontractors
Pyramid Constructors withheld retainage owed to subcontractor Sunbelt Controls because the school district owner refused to pay Pyramid due to a dispute between them. Sunbelt sued and won. The Texas Court of Appeals ruled that a 'pay when paid' clause does not protect a contractor from paying a subcontractor when the contractor's own dispute with the owner causes non-payment. The contractor must pay the subcontractor regardless of whether the owner pays the contractor.
Key Takeaways
- •A 'pay when paid' clause in your subcontract does NOT protect the contractor if the contractor's own actions or disputes with the owner cause non-payment. You can still demand payment.
- •If the contractor withholds retainage because of a dispute between the contractor and owner (not because of your work), you have a strong legal claim to recover that money plus interest and attorney's fees.
- •Get clear language in your subcontract specifying when retainage is due and under what conditions it can be withheld. Disputes between contractor and owner should not be your problem.
Payment was nevertheless due Sunbelt under the unambiguous language of the subcontract.
Frequently Asked Question
Can my contractor refuse to pay me retainage because they're in a dispute with the owner?
No. Under Texas law, a 'pay when paid' clause does not protect a contractor from paying you if the contractor's own dispute with the owner caused the non-payment. You can sue for the retainage owed, plus interest and attorney's fees. The contractor must pay you unless the non-payment is caused by your acts or omissions.
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