Shaw Constructors, Cross-Appellee v. Icf Kaiser Engineers, Inc., Pcs Nitrogen Fertilizer, L.P.
395 F.3d 533 | Court of Appeals for the Fifth Circuit | 2004
What This Case Means for Subcontractors
A subcontractor performed $38 million in work but was owed $5.3 million when the general contractor materially breached. The subcontract contained a lien waiver favoring the owner. The Fifth Circuit ruled that when a general contractor materially breaches, the subcontractor can treat the contract as dissolved, which retroactively cancels the lien waiver obligation. This means subcontractors are not locked into lien waivers if the contractor fails to pay.
Key Takeaways
- •Material breach by the general contractor allows you to dissolve the subcontract and recover lien rights, even if you signed a lien waiver
- •Dissolution works retroactively—it erases the contract as if it never existed, including the lien waiver clause
- •You can raise the same defenses against an owner (as third-party beneficiary) that you could raise against the general contractor
- •Document the general contractor's failure to pay promptly; material breach is your key to unlocking lien rights
Dissolution operates retroactively, restoring parties to pre-contract positions.
Frequently Asked Question
If I signed a lien waiver but the contractor hasn't paid me, can I still file a lien?
Yes, if the contractor materially breached the contract (like failing to pay). The Fifth Circuit ruled that material breach allows you to dissolve the contract retroactively, which cancels the lien waiver obligation. You must prove the breach and act promptly to preserve your lien rights.
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