Walton Technology, a subcontractor on a federal project, sued for unpaid equipment rental fees. The subcontract contained a 'pay when and if paid' clause stating Walton would only get paid after the prime contractor received payment from the government. The Ninth Circuit ruled that such clauses do not automatically waive a subcontractor's rights under the Miller Act, which guarantees payment for work on federal projects. The court sent the case back for trial, rejecting the surety's argument that the unpaid clause excused them from liability.
A 'pay when and if paid' clause in your subcontract does not eliminate your Miller Act payment bond rights—courts require a clear, explicit waiver to remove those protections
If the prime contractor hasn't been paid by the government, you may still have a valid claim against the Miller Act surety bond; don't assume you're out of luck
Document everything about payment terms in writing and push back on vague 'pay when paid' language—courts scrutinize these clauses closely and interpret them against the drafter