A California appellate court ruling on an industry standard “pay-when-paid” contract could have major implications about how and when subcontractors are paid for project work. The April 17 judgment held that the pay-when-paid clause violated state public policy and did not provide for payment within a reasonable time.

In the case ofCrosno Construction Inc.诉旅行者伤亡，the Fourth District California Court of Appeals found the clause on a public works contract to be “unenforceable,” unreasonably delaying payment to the subcontractor until some “undefined, unspecified point in time.”

总承包商克拉克兄弟公司（Clark Bros. Inc.

When Crosno’s work was nearly finished, the project stopped due to a dispute between Clark and the owner, North Edwards Water District in Kern County. Crosno then sued Clark and its surety, Travelers Casualty and Surety Company of America, to receive payment for its work under Clark’s public works payment bond.

旅行者辩称，直到水区支付克拉克，克罗斯诺就不需要支付。审判法院不同意，并认为克罗斯诺应在克拉克和该地区之间的争议进行时支付。在担保人上诉后，上诉法院确认了初审法院的裁决。

统治是一件大事

“这项裁决是一件大事，因为这意味着分包商甚至可以在总承包商完成所有者追回债券之前就可以从公共工程工作中的债券进行付款。”＆Hancock LLP。“这很大，因为它会给主要承包商施加压力，要求他们向分包商付款，然后再向业主那里付款。”

McLennon, who also serves as government relations chair for American Subcontractors Association of California, says the ruling in effect makes prime contractors part-financers of the project. “And this is a major concern for prime contractors because if they have to be funding the money, they have to have great capitalization, and it costs them money to get the money.”

Crosno合同中的付费后条款表示，克拉克将在从水域付款后的“合理时间”内支付Crosno。分包合同进一步指出，这一“合理的时间”“在任何情况下，都不是承包商和分包商要求的时间，以结论其对所有者或其他责任方获得付款的法律补救措施……”

克罗斯诺案在1997年地标案中回应了加利福尼亚最高法院的裁决，Wm。R. Clarke Corp.诉Safeco Ins。公司which found “pay-if-paid” clauses to be unenforceable in construction subcontracts.

斯科特·霍尔布鲁克（Scott Holbrook）代表克拉克（Clarke）案中的一名分包商撰写了摘要，并为克罗斯诺（Crosno）辩护。

“As I argued before the court of appeals in the Crosno case, ever since the Clarke decision, [prime] contractors have tried to redefine when a subcontractor should be paid in a longer and longer time frame,” says Holbrook, a partner with Crawford & Bangs, LLP. “And this ruling puts a much shorter limit on the ‘when.’ You can’t have an indefinite payment period; it has to be definitive, and it has to be within the statutory time frame.”

Crosno Construction总裁Wade Crosno表示，对于分包商来说，等待所有者与总承包商之间的诉讼结论可能很长一段时间。

Sub 'Pleased' With Decision

“在pay-when-paid规定在我的例子中,the payment bond surety to this day would have no duty to pay faultless subcontractors sums due in 2014, because litigation between the owner and the general contractor is still pending,” he says. “I don’t think that’s right, and we’re pleased that the judge agreed with us.”

克罗斯诺说，成功竞标加利福尼亚州公共工程项目的分包商在给予工作范围后面临困境，然后签订了包含付款条款的合同。

“如果分包商拒绝签订合同，他们将面临未能签署'行业标准'合同的替代。在我案中，付费的条款来自AGC表格分包。” Crosno说。“在这种情况下，他们可能会面临总承包商的诉讼，试图追回其出价和替代分包商之间的任何差异。如果他们签名，他们会面临他们没有归因于出价的风险，这是他们可以正确和及时执行自己的工作的可能性，但在不确定的时间内保持无偿。就我而言，已经有几年了。希望我们的案子能解决这个问题。”

Matthew B. O’Hanlon, a partner in Los Angeles office at law firm Barnes & Thornburg, says the Crosno case demonstrates how important it is for all parties in a construction process to be mindful of relevant contractual language and its enforceability under the evolving case law.

“This case represents a cautionary tale about how an open-ended pay-when-paid clause ran afoul of California law and public policy,” he says. “I think the key implication is that a general contractor can’t necessarily rely on a pay-when-paid clause to defer payment issues with subcontractors pending litigation with an owner or otherwise.”