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Sub May Get Paid Despite Pay-when-paid Clause Obstacle

Thursday, December 02, 2010 01:29 am


Ambiguity - Flow-Down Provision

McAnulla Electrical Constr., Inc. v. Radius Technologies, LLC, 2010 Del. Super. Lexis 407 (Sept. 24, 2010)

Pay-when-paid and pay-if-paid clauses are horses of a different color to subcontractors seeking payment for work even when the contractor hasn't yet been paid. McAnulla Electrical Construction, Inc. (McAnulla) sued Radius Technologies, Inc. (Radius), which had hired McAnulla to work on a fire alarm system but failed to pay the sub $68,085 due under the subcontract. Radius, itself a subcontractor, had not paid McAnulla because the general contractor, James G. Davis Construction Corporation (Davis), had not yet paid Radius. (The project owner had walked away from the project without paying Davis for more than $2 million dollars of work.) A pay-when-paid clause in the Davis-Radius contract made Davis' payments to Radius conditional on the owner's payments to Davis.

The Radius-McAnulla subcontract contained a flow-down provision that incorporated by reference the Davis-Radius subcontract. Nevertheless, McAnulla, questioning the validity of the flow-down  provision, argued that the paywhen-paid clause did n [...]

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