You Never Give Me Your Money: Navigating Conditional Payment Terms on Bonded Projects-Navigating Conditional Payment Terms on Bonded Projects Handout

Navigating Conditional Payment Terms on Bonded Projects Handout

Pdf Summary

This document is a presentation titled "Navigating Conditional Payment Terms on Bonded Projects" given by Brian Roberts, CFO of NAPCO Precast LLC, and Tony Lehman, Partner at Hudson Lambert Parrott Walker, LLC. The presentation covers various topics related to conditional payment terms, including Pay When Paid (PWP) and Pay If Paid (PIP) clauses, their enforceability, their effects on payment bond claims and lien claims, negotiating PWP/PIP clauses, and risk management strategies.<br /><br />The presentation explains that PWP clauses fix a time for payment but do not suspend the right to payment indefinitely, while PIP clauses make payment by the owner an absolute condition precedent to the general contractor's obligation to pay subcontractors. The enforceability of PWP/PIP clauses varies by state, with some states considering them fully enforceable, some considering them unenforceable, and others being undecided.<br /><br />The presentation also discusses the effects of PIP clauses on subcontractors, such as being reliant on the owner's creditworthiness. Risk management strategies mentioned include establishing Master Service Agreements (MSAs) with general contractors that do not include PWP/PIP clauses, conducting subcontract reviews with legal counsel, and adjusting pricing to mitigate risk.<br /><br />The presentation further explores the impact of PWP/PIP clauses on payment bond claims and lien claims, noting that the enforceability and effects vary depending on whether the project is public or private and the laws of the specific state. The presentation recommends contacting a construction attorney for advice on specific cases.<br /><br />The presentation concludes by suggesting ways to avoid breakdowns in negotiations, such as revising the clause to only allow nonpayment in the event of subcontractor default and not contractor default. It emphasizes the importance of understanding one's rights, including whether there is a payment bond, if there are lien rights, and the ability to negotiate payment terms.<br /><br />Overall, the presentation provides an overview of conditional payment terms on bonded projects and offers guidance on navigating and mitigating related risks.

Keywords

Conditional payment terms

Bonded projects

Pay When Paid

Pay If Paid

Enforceability

Payment bond claims

Lien claims

Negotiating PWP/PIP clauses

Risk management strategies

Master Service Agreements (MSAs)