Jon Straw / May 05, 2021 / 3 minute read
Consider the intersection of a payment bond claim and a pay-if-paid provision.
In defending against a payment bond claim, the principal and surety generally share the same defenses. For example, there is a one-year deadline to file a payment bond claim under the Federal Miller Act. Similarly, both surety and principal have common law rights of setoff (payment reduction) for work that was improperly or untimely performed by a claimant. Even contract provisions setting a reasonable time for payment are still enforceable (i.e., pay-when-paid clauses).
Unlike a pay-when-paid provision that simply sets a reasonable time for payment, a pay-if-paid clause typically conditions payment on the owner first having paid the prime before the prime must pay the sub. Enforceable pay-if-paid clauses must be express and unambiguous because they shift the risk of non-payment to a party that cannot directly trigger the condition. The sub cannot directly contr