Pay-If-Paid Not Easily Waived

Pay-if-paid clauses in construction contracts are intended to shift the risk of owner nonpayment for a subcontractor's work to the subcontractor, so that the general contractor is not obligated to pay if he is not paid by the owner.  These clauses are enforceable in some states and not in others.  In Georgia, a clearly drafted clause is enforceable.  However, a recent court decision went further and announced that such a clause cannot be waived unless the evidence is so "clear and unmistakable" as to "exclude any other reasonable explanation."  Vratsinas Construction Co. v. Triad Drywall, LLC, 321 Ga. App. 451, 739 S.E.2d 493 (2013).

The case involved a drywall subcontractor's payment claim against the general contractor on a shopping center construction project.  The subcontract contained a pay-if-paid provision that payments were "expressly and unequivocally contingent upon ... receipt of payment from Owner for the Subcontract Work."  It also provided that the