Main Electric, Ltd. v. Printz Services Corp.

Supreme Court of Colorado · 1999 · Contracts

Contractsconstruction contractsconditions precedentpay-when-paid clausespay-if-paid clausespay-when-paidpay-if-paidcondition precedent

Facts

Printz Services was the general contractor on a casino project, and C.J. Masonry and Main Electric were subcontractors. C.J. Masonry worked under Printz's preprinted written subcontract, which stated that Printz would make payment to the subcontractor "provided like payment has been made by Owner to Contractor" and would make final payment "provided like payment shall have been made by Owner to Contractor." Main Electric worked under an oral agreement with Printz, but the record did not establish the specific payment terms of that oral contract. Before the project was complete, the owner became insolvent and did not pay Printz, and Printz then refused to pay the subcontractors.

Issue

Did the written subcontract language requiring payment to the subcontractor "provided like payment shall have been made by Owner to Contractor" create a condition precedent that shifted the risk of owner nonpayment to the subcontractor, or was it merely a pay-when-paid timing provision? Also, was Main Electric's claim ripe for appellate review when the trial court had not found the payment terms of the parties' oral agreement?

Rule

Contract interpretation turns on the parties' intent. Because conditions precedent are disfavored and risk forfeiture, a court will construe a doubtful clause as a promise rather than a condition unless the contract uses clear and unequivocal language showing that the subcontractor will be paid only if the owner first pays the general contractor and that the subcontractor assumes the risk of the owner's nonpayment.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Denver, Summit Peak Builders hired Elena Ruiz Masonry under a written subcontract drafted by Summit Peak. The subcontract stated, "Contractor shall pay Subcontractor within 7 days after Contractor receives payment from Owner for Subcontractor's work." After Elena completed the work, the owner became insolvent and never paid Summit Peak.

Under the majority rule, how should a court most likely interpret this clause?

Explanation. The majority held that a subcontract payment clause is treated as a promise concerning timing unless the contract clearly and unequivocally states that the subcontractor will be paid only if the owner first pays and that the subcontractor bears the risk of owner nonpayment. Language tying payment to receipt from the owner, without more, does not clearly shift that risk. Thus the clause delays payment but does not eliminate the general contractor's ultimate duty to pay.