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Federal Court in Pennsylvania Holds Pay-If-Paid Clause Unenforceable Where Prime Contractor's Inadvertent Delays Contribute to the Owner's Withholding of Payment

Connelly Constr. Corp. v. Travelers Cas. & Surety Co. of Am., 2018 U.S. Dist. LEXIS 123009 (E.D. Pa. July 24, 2018)

Author: Kristopher Berr

9/20/2018

Read the full post at Constructlaw

Federal Court in Pennsylvania Holds Pay-If-Paid Clause Unenforceable Where Prime Contractor's Inadvertent Delays Contribute to the Owner's Withholding of Payment

This post was published in the October 4, 2018 issue of eNews published by National Association of Credit Management (NACM).

The Commonwealth of Pennsylvania Department of General Services undertook a project for the construction of a new maximum security prison facility in Montgomery County, Pennsylvania. Walsh Heery Joint Venture (WHJV) was the prime contractor and it retained Connelly Construction Corporation as its masonry subcontractor.

The prime contract permitted the Commonwealth to withhold retainage from WHJV until completion of the project. Similarly, the subcontract permitted WHJV to withhold retainage from Connelly in proportion to the retainage held by the Commonwealth. The subcontract also included a pay-if-paid clause under which Connelly agreed that it was not entitled to payment unless, as an express condition precedent, WHJV was paid by the Commonwealth.

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