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Colorado Supreme Court - 980 P.2d 522
Tags: Contracts, Conditions
tl;dr:
Sub and general contractors had a deal where one of the conditions was that GC would pay SC “provided like payment” shall be paid by the owner. Before the project was complete, the owner went insolvent and couldn't pay the GC. The GC didn't pay the SC.Video Summary
Case Summary
In Main Electric, Ltd. v. Printz Services Corp. (1999), the Supreme Court of Colorado examined a dispute over payment for work done on a casino construction project. An electrical subcontractor (the plaintiff) sued a general contractor (the defendant) for payment under an oral contract. The defendant claimed they did not have to pay because of a pay-if-paid clause requiring the project owner to pay them first. Additionally, they argued the plaintiff waived their right to payment by signing lien waivers.
The trial court ruled in favor of the defendant, but the plaintiff appealed. The higher court supported the plaintiff, determining that the oral contract did not have a clear pay-if-paid clause, and the plaintiff did not waive their right to payment. Colorado law requires that pay-if-paid clauses must explicitly state the condition for payment and that the subcontractor takes the risk of nonpayment by the project owner. The court also found that the lien waivers signed by the plaintiff only released liens on the property, not contractual obligations.
The case demonstrates the court's application of state law and contract principles when interpreting agreements and balancing justice and fairness with the autonomy of the involved parties. This case emphasizes the importance of good faith and fair dealing in construction transactions.
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The Colorado Supreme Court ruled that a construction contract's payment provision is a "pay-when-paid" clause, obligating the general contractor to pay the subcontractor even if the owner becomes insolvent. The court emphasized that clear language expressing the parties' intent is necessary to create a condition precedent. The court of appeals rejected Main Electric's claim for quantum meruit as there was an express oral agreement between the parties. However, the case was remanded as the parties disputed whether the payment clause was part of their agreement and the trial court did not resolve this dispute. The court concluded that the payment provision in the contract between Printz and C.J. Masonry is not a pay-if-paid clause. The Orman case was examined, and the court held that the contract made the receipt of money by the general contractor a condition precedent to the subcontractor's payment, and that filing a lien did not constitute "receiving money." The case involving a second subcontractor was remanded to the trial court for further proceedings.
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