Articles

Case Holding Pay-When Paid Provisions Void an Unenforceable Extended to Public Works Contracts

By Gary R. Kershner

Earlier this year the California Supreme Court held in the context of a private works payment dispute that the "pay-when-paid" provision relied upon by the general contractor was void and unenforceable.

In a case recently decided by the Second Appellate District, this ruling was extended to publics works projects as well. In that case, the general contractor had argued it did not owe interest to its sub because the right to payment did not arise under its "pay-when-paid" clause until the general was paid, which had not yet occurred.

The Court held that the sub was entitled to interest because the "pay-when-paid" provision was void and unenforceable in a publics works project as well as a private job.

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Gary Kershner is an attorney with the Law Offices of Gary Kershner, a member of the Exchange since 1955. The Law Offices of Gary Kershner emphasizes construction law. It also maintains a general litigation, estate planning and business practice as well. The Law Offices of Gary Kershner can be reached at (510) 832-6500.