Fundamentals of Construction Contracts in Louisiana: Contractor and Subcontractor Payment Remedies

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August 16, 2018
Author: Davis B. \"Pepper\" Allgood
Organization: Jones Walker LLP

State and federal statutes provide several remedies to help contractors and others who work on Louisiana construction projects get paid for their work. Three primary sets of remedies exist. Each applies to a different type of construction project: (1) the Louisiana Private Works Act applies to private construction projects; (2) the Louisiana Public Works Act applies to state government construction; and (3) the Miller Act is a federal statute that provides payment remedies for subcontractors and suppliers on United States Government projects. Several miscellaneous statutes supplement the remedies available on private projects. This paper will provide an overview of those remedies, and it will also discuss how contractors try to limit the effectiveness of these remedies through conditional payment clauses.

Louisiana’s Private Works Act
Louisiana’s Private Works Act is found at La. R.S. 9:4801 et seq. It provides protection to most of the persons who supply goods or services on a private construction project, whether or not those persons have contracts directly with the owner or the general contractor. The Private Works Act gives statutory claims against the owner, and it gives privileges against the property itself. It also gives claims against the general contractor if the claimants dealt with the general contractor or with his subcontractors. The Act provides a fairly complex scheme for preserving, asserting and extinguishing these statutory claims for payment.

Several categories of persons who deal directly with the owner on a project may obtain a statutory privilege on the real estate involved to secure their contract claims against the owner. The following may obtain privileges on the owner’s property when they have contracted directly with the owner: contractors, laborers and other employees of the owner, sellers of materials used on the project, lessors of equipment used at the site under written leases, and architects, engineers and surveyors.1 These persons, because they have direct contractual claims, do not need a statutory claim.

The same categories of persons, if they contract with a contractor or subcontractor2, have statutory claims against both the owner and the general contractor. These claims also may be secured by a privilege on the owner’s property.3

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The Private Works Act provides a mechanism for an owner to free himself and his property from liability on the statutory claims and privileges of the persons with whom he did not contract. To do so, the owner must make the contractor supply a proper payment bond. He also must see to it that notice of the general contract, with a copy of the bond attached, is filed in the mortgage records of the parish where the property is located.4 If the owner follows the procedures available to him in the Act, the bond will replace the property and his own liability as the security for these claims. The posting of the bond only relieves the owner of the statutory claims granted under the Private Works Act. Obligations that an owner – or that a contractor – must pay directly under a contract or on some other legal basis are in addition to the statutory claims created by the Private Works Act.5 The owner remains obligated to honor his or her contract, notwithstanding the posting of a bond, and may still incur liability in tort or on some other basis apart from the Private Works Act.

Persons who hold Private Works Act claims must take steps to preserve those statutory claims and any privileges that secure them. The first and most important step is to file in the parish mortgage records a “statement of claim or privilege.”6 This is sometimes referred to as “liening the job.” The time period for filing a statement of claim depends upon the identity of the claimant and the circumstances of the project.

The Private Works Act creates one set of rules for claimants who contract directly with the owner. A general contractor on a job exceeding $25,000 may only obtain a privilege on the owner’s property if notice of the contract was properly filed.7 If it was, the general contractor has sixty days from the filing of a notice of termination or from substantial completion of the work in which to file his statement of claim.8 Other claimants who deal  directly with the owner have the same sixty day period in which to file their statements of claims.9

The Private Works Act has different rules for claimants who do not contract directly with the owner, but who instead deal with contractors or subcontractors. And those claimants have differing time periods in which to file their statements of claim, depending on whether notice of the contract was recorded.

If a notice of contract was timely and properly recorded, claimants who deal with contractors or subcontractors must file their statements of claim and deliver copies to the owner within thirty days from the filing of a notice of termination.10 If a notice of contract was not filed, the time period is sixty days, running either from the filing of a notice of termination or from substantial completion or the abandonment of the work.11 The Act makes an exception for sellers of materials used in a residence, who get seventy days in which to file their statements of claims if no notice of contract was filed.12

The statute does not clearly state what happens if the notice of contract is recorded but the owner does not file a notice of termination to start the thirty day window. An arguable construction would require that claimants file within the sixty days after actual substantial completion or abandonment, even with no recorded notice of the event. However, the cases have held that, where a notice of contract was filed, the time period within which the claimant must file its claim does not begin until the owner files the notice of termination.13 If the claimant did not deal directly with the contractor, the claimant must take an additional step to preserve his claims against the contractor and against the surety on the contractor’s payment bond. In addition to recording his statement of claim, such a claimant must also send written notice of the claim to the contractor within thirty days after notice of termination of work has been recorded.14

On the other hand, the Act also allows delivery of a claimant’s statement of claim to the contractor to substitute for recordation – at least as to the claim against the contractor. A claimant may preserve his claim against the contractor, even without recording the statement of claim, if he delivers the statement of claim to the contractor within the time period given for recordation.15

Private Works Act claims and privileges cover payment of the principal amounts owed for the goods and services provided on the job, interest on those principal amounts, and fees paid for recording the statements of claim.16 The fees included are the fees paid to the  clerk of court for recording costs, not attorney’s fees for preparing the statement of claim.17

The Act provides additional remedies to sellers of materials and to laborers. Where contractors or subcontractors receive payment themselves but fail to pay the sellers or the laborers, these claimants may recover civil penalties, costs and attorneys fees.18

Claimants lose their statutory claims against the owner, the contractor and the surety unless they file suit within one year from the deadline for recording their statements of claim.19 Suit against any one of the three – owner, contractor or surety – preserves the Private Works Act claim against all three.20 If the suit is not timely filed, the claims lost are those created by the Private Works Act. The filing deadline does not affect other claims. For example, parties owed money under a contract may still sue to recover under the contract.21 In order to preserve his privilege on the property against third parties who might acquire rights against the property, a claimant must take an additional step beyond filing suit. Within one year after the claimant records his statement of claim, he must also record in the parish mortgage records a “notice of lis pendens.” This notice must identify the suit filed on  the claim. It alerts persons who might buy the property or obtain a security interest in it of the existence of the litigation, and it lets such persons know that the claimant is actively asserting a privilege against the property.22

If an owner or “other interested person” believes that a claimant has improperly filed a statement of claim, or, if the claim has been paid or otherwise extinguished, the Private Works Act provides a method to quickly obtain cancellation. The interested person may send a written request that the claimant authorize the recorder of mortgages to cancel the statement from the public records. If the claimant does not comply within ten days, the interested person may sue the claimant and the recorder of mortgages for a judgment declaring the claim or privilege extinguished. The judgment may direct the recorder of mortgages to cancel the statement, and it may award the successful plaintiff his damages and attorney’s fees.23 The proceeding is tried by summary procedure, which means it takes much less time than an ordinary lawsuit.24

The Private Works Act also allows “any interested party” – usually the owner or the contractor – to obtain the cancellation of a statement of claim by depositing a bond with the parish recorder of mortgages.25 The bond must guarantee payment of the obligation secured by the privilege, plus interest, costs and attorney’s fees, up to 125% of the amount claimed in the statement of claim. This allows title to the property to be cleared while protecting the claimant’s right to payment.

Frequently, a construction project with problems will have multiple competing claims for limited available funds. The Private Works Act allows “the owner or any other interested party” to convoke a concursus proceeding to resolve claims affecting the project.26 The person invoking the concursus must cite the following persons to appear, unless they are already parties to the concursus: (1) all persons who have preserved their claims against the owner or their privileges on the immovable; (2) the owner; (3) the contractor; and (4) the surety.

A concursus proceeding under the Private Works Act is generally conducted as an ordinary proceeding. However, an owner, if the relief is warranted, may by summary procedure obtain an order discharging and canceling the claims and privileges and discharging the owner from further liability.27 To obtain this relief, the owner must deposit with the court any amounts he contends are still owed to the contractor. The court may then decide, on a rule tried separately from the main cause of action, the following issues: (1) whether the owner has deposited the correct amount; (2) whether the various claims and privileges asserted by claimants have been properly preserved; (3) whether a notice of the contract and a bond were properly and timely filed; and (4) whether the bond complied with the requirements of the Act.

A surety, as an “interested party,” may convoke a concursus. To do so, the surety must deposit with the court the lesser of the amount of the bond or 125% of the total amount claimed by persons who timely filed statements of claim.28

The attorney for an owner, claimant, or privilege holder who convokes a concursus under certain circumstances may be awarded a reasonable fee by the court. The fee is payable by the contractor and his surety, and may be paid out of any funds deposited into the court registry that remain after payment of all valid claims and privileges.29

Louisiana’s Public Works Act
Persons who supply labor or materials on public construction projects have a special set of statutes that protect their payment rights. The Louisiana Public Works Act, in La. R.S 38:2241, et. seq., protects the rights of subcontractors, materialmen, laborers and others involved in the construction of public works.30

Unlike the Private Works Act, the Public Works Act does not allow these persons to obtain a privilege on the property they have improved. Instead, it gives them remedies against the contractor and his surety, and in some cases against the government entity. And it provides mechanisms to make sure that the money will be available to fund these remedies. The Louisiana Supreme Court and the courts of appeal have said that the Public Works Act provides exclusive remedies to the parties involved in public construction work.31

Under the Public Works Act, the state, and any of its boards, agencies and political subdivisions, must require that contractors on their public works projects post bonds. The requirement applies to any contract worth more than twenty-five thousand dollars, and the bond must be for at least fifty percent of the contract price.32

The bond protects “claimants,” a term which includes any person owed money under a contract with a contractor or a subcontractor on the job for work, labor, material, supplies, and other listed goods and services.33 Only creditors of contractors and subcontractors have rights under the bond; the statute does not extend its remedies to suppliers of suppliers.34 A claimant preserves his remedies under the Act by filing a sworn statement of the amount due him with the governing authority for whom the work was done and by recording the sworn statement in the mortgage records of the parish where the work was done.35

The public entity for whom a project is built may cut off the period during which claimants may file and record statements of amount due. The government does this by placing in the mortgage records an acceptance of the work or a notice that the contractor has defaulted. An acceptance of the work may not be filed until the work is substantially complete, a status determined by the architect or engineer on the project. Claimants have until forty-five days after the recording of the acceptance of the work or the notice of default in which to file their statements of amount due with the governing authority having the work done and to record the statements in the mortgage records for the parish where the work was done.36

The filing and recordation of a statement of the amount due by a claimant prevents the public entity from making final payment to the contractor without providing for payment to the claimant. If the public entity makes final payment to the contractor, it must either deduct the total amount of all outstanding claims served on it or it must obtain a bond from the contractor to cover the total amount of all outstanding claims. If the government entity does not make one of these provisions for paying claimants, the government entity becomes  liable for the claims.37

The filing and recordation of the statement of the amount due by a claimant also gives the claimant a statutory right of action against the contractor and his surety.38 The statute, accomplishes this through the following rather oblique language in La. R.S. 38:2247: “Nothing in this Part shall be construed to deprive any claimant, as defined in this Part and who has complied with the notice and recordation requirements of R.S. 38:2242(B), of his right of action on the bond furnished pursuant to this Part, provided that said action must be brought against the surety or the contractor or both within one year from the registry of acceptance of the work or of notice of default of the contractor.”

To preserve this right of action, at least as to the surety, the claimant must timely file his statement of amount due with the governing authority and record it in the mortgage records.39 Although many cases contain language to the effect that the Public Works Act provides “the exclusive remedies available to parties proceeding thereunder,”40 courts have said that direct subcontractors may nevertheless pursue their contract claims against the  general contractor, notwithstanding the lack of timely filing and recordation.41 To preserve his statutory rights against the contractor, a claimant who did not contract directly with that contractor also must give the contractor timely written notice of his claim. The claimant must give this written notice within the same forty-five day period, running from recordation of the acceptance of the work or notice of the contractor’s default.42 Some courts have held that actual notice timely received by a contractor suffices, even if formally defective.43

The Public Works Act gives a claimant one year in which to file suit on his claim. The suit may be brought against the surety or the contractor or both, within one year from recordation of acceptance of the work or from notice of default by the contractor.44 If a claimant recovers in court on a timely and properly recorded statement of claim, he may also recover an additional ten percent of his claim as an attorney’s fee. A prerequisite is amicable demand on the contractor or surety and the passage of thirty days with no satisfaction. On the other hand, the contractor or surety may recover a reasonable attorney’s fee in litigation where a claimant has proceeded without just cause or in bad faith.45

The Public Works Act creates procedures similar to those in the Private Works Act by which owners and other interested persons may address recorded statements of claim. An owner or interested person may make a written demand for authorization to have an improperly filed or extinguished claim cancelled from the mortgage records. As with the Private Works Act, the claimant has ten days in which to comply, after which the party making demand may bring a lawsuit to obtain the cancellation. The suit is tried using summary procedures. A claimant who, without reasonable cause, fails to give the requested authorization may be held liable for damages and attorney’s fees.46

An interested party may obtain the cancellation of a recorded statement of claim by posting a bond or other form of security for 125% of the claim, to cover principal, interest, costs and attorneys fees. Besides a bond, the security may be cash, certified funds, or a federally insured certificate of deposit.47 A suit to recover on this substituted security must be brought by a claimant within the same one year period for suit on the original payment bond.48

The Act provides that, at the end of the forty-five day period for filing statements of claim, the public entity must bring a concursus proceeding if any recorded claims remain unpaid. The government entity must file the proceeding in the parish where the work was done. In the proceeding, the government must cite all claimants and the contractor, subcontractor, and surety on the bond, it must assert whatever claims it has against any of them, and it must call upon the claimants to assert their claims. If the governing authority fails to file the proceeding, any claimant may do so.49

In the concursus proceeding, the claimants have ten days after receiving notice of the proceeding in which to object to the solvency or sufficiency of the contractor’s payment bond. If no claimant objects, the clerk of court issues a certificate to that effect. At this point, the public entity is absolved from any potential liability, and the recorder of mortgages must cancel any statements of claim. If claimants do object, any objections are tried summarily. If the court finds a deficiency in the bond, the public entity becomes liable to the same extent the surety would have been.50

The Public Works Act also regulates the provisions contained in public contracts with contractors. Contracts typically authorize the state or other governmental entity to hold a portion of the contract price as retainage until the end of the forty-five day period for filing statements of claim. The Act limits the amount of retainage to ten percent of the price on contracts under $500,000. It limits retainage to five percent of the amount of any contract for $500,000 or more.51

In the past, government entities sometimes used retainage as leverage on contractors to obtain “correction” of disputed punch list items. Contracts would frequently authorize holding the full statutory limits of retainage as long as any punch list items remained unfinished. In 2001, the Act was amended to provide that public entities may only withhold sufficient retainage on punch list items to cover the value of the items on the punch list, as estimated by the project design professional.52

The Miller Act
The Miller Act, 40 U.S.C. §§ 3131 through 3134, provides payment remedies for subcontractors and suppliers involved in federal government construction projects may find payment remedies under what until recently was known as the federal Miller Act. The Miller Act was formerly found at 40 U.S.C. § 270a – 270d, but its provisions were amended and moved in 2002.53

The Miller Act requires a contractor under a contract for the “construction, alteration, or repair of any public building or public work of the United States” to supply two bonds – a performance bond and a payment bond.54 The performance bond runs in favor of the government; it secures the contractor’s performance under the contract.55 The payment bond provides a payment remedy for some of the persons who supply labor and materials on the construction project.56 These protected persons have a right of action to sue on the bond and recover from the surety any unpaid balance due them.57

The Miller Act only applies to work under prime contracts in excess of $100,000.58 However, it also provides that the Federal Acquisition Regulation shall provide alternatives to payment bonds as payment protections for suppliers of labor and materials under public contracts that are between $25,000 and $100,000.59

An important limitation on the Miller Act is that it only protects subcontractors and suppliers who deal with the contractor or with subcontractors of the contractor.60 Those who deal with second tier subcontractors are not protected,61 nor are suppliers to suppliers. 62 A Miller Act claimant sues “in the name of the United States for the use of the person suing.”63 However, this does not mean that a claimant needs to obtain permission from or the actual participation of the United States. An unpaid claimant sues on its own initiative.64

A Miller Act claimant’s right to sue arises when he has gone without full payment more than ninety days after the day on which he last supplied labor or materials on the job.65

A claimant who dealt with a subcontractor rather than the contractor, as a prerequisite to suit, must give the contractor written notice of his claim within this ninety day period.66 Although the Miller Act claimant may not sue until ninety days have passed from the day he last supplied labor or materials, he must file his suit within a year from that same day. If a year passes without suit, he loses his right to sue.67

A Miller Act suit may only be brought in federal district court. Federal jurisdiction is exclusive and non-waivable.68 The statute places venue in the federal district in which the contract was “to be performed and executed.”69

The Miller Act only provides for recovery of the unpaid balance due the claimant.70 The Miller Act per se does not provide a basis for awarding attorney’s fees.71 However, a federal court may exercise supplemental jurisdiction over a state law cause of action to award attorney’s fees against the contractor.72

Although state law remedies may be available against the contractor, the Miller Act provides the exclusive remedy available against the surety. 73 Nevertheless, courts have allowed attorney’s fee claims against the surety if the contract provides an attorney’s fee claim against the contractor.74 Federal courts look to state law to determine the availability of interest75 – in Louisiana judicial interest runs from date on which the money was due. 76 The Miller Act applies to claims for “labor and material” that have been “furnished . . . in carrying out the work,” and for which the claimant “has not been paid in full.”77 Early cases addressing the issue held that this language did not allow Miller Act claimants to recover for delay damages, on the rationale that the Miller Act does not cover breach of contract damages.78 More recently, cases have allowed delay claims in certain circumstances.

The federal Fifth Circuit Court of Appeal has allowed recovery of delay costs, including home office overhead and general and administrative expense.79 However, that court has emphasized that “the subcontractor can only recover from the surety for additional or increased costs actually expended in furnishing the labor or material in the prosecution of the work provided for in the contract and attributable to the delay.80 A surety’s Miller Act liability is limited “to the subcontractor’s ‘out-of-pocket costs of delay.’”81

Other Louisiana State Law Payment Remedies
La. R.S. 9:2784 provides special help to subcontractors and suppliers owed money by contractors. Under that statute, when a contractor receives payment from the owner the contractor shall promptly pay “such monies received to each subcontractor and supplier in proportion to the percentage of work completed . . . by such subcontractor.”82 If the contractor without “reasonable cause” fails to pay the subcontractor or the supplier within 14 days after the contractor’s receipt of payment, the contractor owes the claimant a penalty of ½ of one percent per day, up to 15%, plus “reasonable attorney’s fees for the collection of the payments due.” However, “any claim which the court finds to be without merit shall subject  the claimant to all reasonable costs and attorney’s fees for the defense against such claim.” 83

La. R.S. 9:2784 also may help contractors resist payment in certain circumstances. The statute provides that, if “for any reason” the contractor receives less than full payment, the contractor shall be obligated “to disperse only the funds received on a prorated basis with the contractor, subcontractors, and suppliers each receiving a prorated portion based on the amount due on the payment.”

This “for any reason” language may not be as useful to contractors as it sounds. For example, in Gitz v. Quality Restorations Contractors, Inc.,84 Louisiana’s Fourth Circuit Court of Appeal refused to let a contractor withhold payment from a subcontractor where the owner had withheld liquidated delay damages out of the money otherwise owed the contractor. The court did not believe that the statute was meant to allow a contractor to pass on to the subcontractor his own responsibility for delays that the subcontractor did not cause.

A claimant on a surety bond may also be able to recover his attorney’s fees if the surety fails to pay after amicable demand. La. R.S. 9:3902 lets a claimant recover an additional ten percent on amounts recovered from a surety in litigation. To set up this recovery, the claimant must make written demand on the principal and surety and wait thirty days thereafter before filing suit. To recover the attorney fee, the claimant must recover the full amount of the demand.

La. R.S. 9:2781 lets persons owed money on “open accounts” recover attorney’s fees under certain circumstances, in addition to the amounts owed them for the goods and services they have supplied. La. R.S. 9:2781(D) says that \"'open account' includes any account for which a part or all of the balance is past due,” and it expressly includes “debts incurred for professional services.”

Assuming the existence of an open account, to recover attorney’s fees the claimant must make written demand on the debtor correctly setting forth the amount owed. If the claimant makes the demand in advance of filing suit, the passage of thirty days without payment entitles the claimant to attorney’s fees incurred in obtaining a judgment. A petition initiating a lawsuit can qualify as a written demand. In city court suits, the debtor can avoid liability for attorney’s fees by paying the account within ten days after service of the petition; in suits in other courts, the debtor must pay within fifteen days.

The distinction between an open account and an ordinary contract is not always clear. An open account arrangement “generally leaves undetermined key aspects of the obligation, such as the time period during which services will be rendered or the total cost of the services for which a party may be liable.”85

Courts have frequently looked to four factors in analyzing whether a relationship involved an open account: “(1) whether there were other business transactions between the parties; (2) whether a line of credit was extended by one party to the other; (3) whether there are running or current dealings; and (4) whether there are expectations of other dealings.”86 However, the statute specifically provides that a single transaction may involve an open account. Consequently, in Frey Plumbing Co., Inc. v. Foster, 87 the Supreme Court held that the fact that a plumbing contractor had provided services on a one-time basis, with no expectation of ongoing or future work, did not justify summary judgment dismissing the contractor’s open account claim.

Historically, courts have avoided characterizing construction contracts as open accounts.88 A key distinction between an ordinary construction contract and an open account can be that “[i]n the typical construction contract, payment is expected upon completion of the job.”89 Consequently, where a demolition contractor refrained from demanding payment in anticipation of future work, the Third Circuit Court of Appeal found that the demolition “was construction work, [but] it was not a construction contract,” and the contractor had a valid open account claim.90

An open account claim also requires that the claimant have a contract directly with the person against whom he tries to recover the attorney’s fees. Thus, a supplier who deals with a contractor has no open account claim against the owner.91

La. R.S. 22:1892 requires that insurers “pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss from the insured or any party in interest.” A finding that a failure to comply with this requirement was “arbitrary, capricious, and without probable cause,” subjects the insurer to a penalty of fifty percent of the amount due, or fifty percent of the difference between any amount the insurer may have tendered and the amount due, plus reasonable attorney’s fees and costs. The predecessor to this statute was applied to a surety’s failure to pay on a performance bond, 92 and La. R.S. 22:1892 should apply to the proper claim on a payment bond. 93

Pay-When-Paid Clauses and Pay-If-Paid Clauses
Contractors frequently impose contract terms on their subcontractors designed to make payment to the subcontractors depend on the contractors’ own receipt of payment from the owner. Sometimes called “conditional payment clauses,” courts typically categorize these provisions as either “pay-when-paid” or “pay-if-paid” clauses. These conditional payment clauses, when enforced, make subcontractors share in the risk that the owner may not pay.

In Southern States Masonry, Inc. v. J. A. Jones Const. Co.,94 the Louisiana Supreme Court refused to let several general contractors escape paying their subcontractors based on conditional payment clauses in their subcontracts. In Southern States Masonry, the  had gone bankrupt, and the general contractors had no hope of payment. The subcontractors had fully performed, but the general contractors took the position that the owner’s default let them off the hook vis-a-vis the subcontractors. Based on the language of the clauses at issue, the Supreme Court rejected this position.

The subcontracts in the Southern States Masonry case contained several clauses generally characterized as “pay-when-paid” clauses. Most of the clauses at issue said that the subcontractor would be paid “upon receipt of payment from the Owner.”

The Supreme Court in Southern States Masonry held that these “pay-when-paid” clauses did not clearly condition payment to the subcontractors on payment to the general contractors. Rather, the court said that such clauses could and should be interpreted to mean only that a general contractor may withhold payment for a reasonable period while waiting for payment from the owner. After expiration of this reasonable period, the general contractor must pay, whether or not the owner has paid.

The Supreme Court justified its ruling by distinguishing the different legal effects given in Louisiana’s Civil Code to terms for performance on the one hand, and suspensive conditions on the other. The Supreme Court interpreted the clauses, as written, to create an obligation on the part of the general contractor to pay. However, the obligation to pay was subject to a term, a time period, for performance.

According to the Supreme Court, the words that the parties used in the subcontracts showed that they believed that payment by the owner to the general contractor was an event that was reasonably certain to occur. The parties did not expect either that the owner would fail to pay the general contractor or that the general could permanently or indefinitely withhold payment from the subcontractors. Under that language, the general contractor could delay payment, for a time, waiting for the owner to pay the general. However, the general contractor ultimately had to pay within a “reasonable” time, regardless of what the owner did.

The Supreme Court left open the possibility that the parties could word their contracts in a way that created a “suspensive condition.” When a contract contains a suspensive condition, the obligation does not even come into existence until the event on which it is “conditioned” occurs. The event may or may not take place, and the obligation, in this case the obligation to pay, may never come into existence.

After Southern States Masonry, contractors began to change the language in their contracts to incorporate what have been referred to as “pay-if-paid” clauses. The new contract language tries to make it clear that the contractor never has to pay the subcontractor unless the owner pays him. Contractors have had more success in enforcing “pay-if-paid” clauses. For example, in Imagine Construction, Inc. v. Centex Landis Construction Co., Inc.,95 the subcontract provided that payment by the owner to the general was a “condition precedent” to the bringing of any action by the subcontractor. “Condition precedent” is a common law term with a meaning similar to Louisiana’s “suspensive condition.” The court of appeal held that under this language, because the owner had not paid the general, the subcontractor could not recover from the general – or from the sureties either.96 Even if a subcontract only contains a “pay when paid” clause, a subcontractor suit may be dismissed as premature. Even a “pay when paid” clause provides a term for payment by the contractor, allowing the contractor to delay payment for a reasonable period. What constitutes a reasonable period depends on the circumstances.97

General contractors have been known to withhold payment from subcontractors when the owner’s failure to pay had nothing to do with the performance of the subcontractor. Louisiana’s First Circuit has refused to let a general contractor withhold payment under a pay-if-paid clause, notwithstanding the owner’s withholding of sums from the general for liquidated damages and punch list items, where the evidence showed that the owner nevertheless had paid the general for the subcontractor’s work.98

In Louisiana, and most other jurisdictions as well, even a pay-if-paid clause will not be enforced in a Miller Act case. The federal Fifth Circuit has refused to let a Miller Act contractor rely on a pay-when-paid clause to defeat a subcontractor’s claim.99 According to the Fifth Circuit, that statute conditions the right to recover on the passage of time from the completion of work or provision of materials, not on payment to the contractor.100 A very recent federal district court decision surveyed the Miller Act cases on conditional payment clauses and found unanimity for the proposition that neither contractors nor sureties may use such clauses to avoid Miller Act liability.101

Subcontractors on private projects in Louisiana similarly may argue that even a clear “pay-if-paid” clause does not affect their statutory claims under the Private Works Act. La. R.S. 9:4802 says that subcontractors have “a claim against . . . the contractor to secure payment of . . . the price of their work.” Subcontractors might argue that this statutory claim is apart from and independent of the terms of their subcontracts. La. R.S. 9:4802(D) aids this argument, providing that “Claims against the owner and the contractor granted by this Part are in addition to other contractual or legal rights the claimants may have for the payment of amounts owed them.”

One federal district court has held that a pay-when-paid clause in a second tier subcontract did not preclude the sub-subcontractor from pursuing its Private Works Act claim against the owner.102 The court in that case reasoned that the conditional payment clause in the contract between the sub-subcontractor and the subcontractor could not affect the second-tier subcontractor’s statutory rights against the owner, with whom it had no contract. That case, however, did not address the effect that a conditional payment clause might have on a subcontractor’s statutory claim against a general contractor when the clause is in the contract between those two parties.

If the Louisiana Private Works Act does provide a claimant with an independent statutory claim against the contractor, notwithstanding the existence of a pay-if-paid clause, then the claimant likely also has a claim against the surety on the bond. La. R.S. 9:4812(C) says that “[t]he condition of the bond shall be that the surety guarantees: (1) To the owner and to all persons having a claim against the contractor, or to whom the contractor is conventionally liable for work done under the contract, the payment of their claims or of all amounts owed them arising out of the work performed under the contract to which it is attached or for which it is given.” This disjunctive language appears to anticipate that the surety may be liable for a statutory claim, even in the absence of a contractual claim. One federal district court has held that a “pay-if-paid” clause in a subcontract will not limit a subcontractor’s rights against a Private Works Act surety.103 That court did not say whether a statutory claim also existed against the general contractor, who was not made a party.

Another federal district court has stated in dicta that “[t]o allow the surety to assert as a defense that the owner has not made payments on the contract would defeat the statutory purpose” of the Private Works Act.104 The statute allows the owner to substitute the surety’s bond for personal liability and a privilege on his property. If the owner could withhold payment and thereby prevent recovery on the bond, while still avoiding personal liability and a privilege on his property, one might conclude that the statutory scheme had been frustrated.

On the other hand, as mentioned above, the Imagine Construction court did allow the sureties in that case the benefit of a pay-if-paid clause.105 The Imagine Construction court did so while expressly acknowledging that the delay might cost the subcontractor its rights against the sureties under the Private Works Act and the bond.106 The subcontractor could not sue unless and until the owner paid the general; meanwhile, the one year statutory delay for filing suit might pass and the subcontractor would lose the right to sue on the bond. Although sureties sometimes include pay-if-paid provisions in the bonds themselves, this may not help them much. La.R.S. 9:4812(D), provides that “[t]he bond of a legal surety attached to and filed with the notice of contract of a general contractor shall be deemed to conform to the requirements of this part notwithstanding any provision of the bond to contrary.” Louisiana courts have refused to allow sureties to limit their liability beyond the provisions of the Private Works Act.107 If the Private Works Act overrides a pay-if-paid clause in a subcontract, putting the clause in the bond itself likely will not make it any more effective.

The Louisiana Public Works Act has different language than does the Private Works Act. The language in the Public Works Act may not be as useful to parties who want to avoid the effect of conditional payment clauses.

Arguably, a subcontractor or other party involved in constructing a public work in Louisiana has no right to proceed under the Public Works Act until that party has a mature contract claim. The language in the Public Works Act can be interpreted, and has been interpreted, to provide that a statutory claim exists only where a contract claim also exists. The Louisiana Public Works Act gives rights only to “claimants,” defined as “person[s] to whom money is due pursuant to a contract.”108 The Public Works Act says that a \"claimant may after the maturity of his claim and within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, file a sworn statement of the amount due him.\"109

Under the current case law, a true pay-if-paid clause precludes the existence of an obligation to pay under the contract. If the owner has not paid, arguably, no “money is due pursuant to” the contract and the claim has therefore not reached “maturity.” Even a paywhen- paid clause delays the enforcement of a contractual duty to pay, arguably preventing the contract claim from reaching “maturity.”

If the payment sought by a subcontractor or other project participant is not “due pursuant to a contract,” and if the party’s claim has not reached “maturity,” that party may not have protection under the Public Works Act. In fact, Louisiana’s First Circuit in Coastal Development Group, L.L.C. v. International Equipment Distributors, Inc., 110 held that, where a pay-if-paid clause prevents the maturation of a subcontractor’s contractual right to receive payment, the subcontractor has no statutory claim under the Public Works Act.111 Another First Circuit panel, at about the same time, issued an apparently contradictory opinion in another case brought under the Public Works Act. In Glencoe Education Foundation, Inc. v. Clerk of Court,112 the trial court had dismissed two  subcontractors’ claims against the general contractor as premature, based on a pay-if-paid clause, but it had awarded the same subcontractors a judgment against the surety. The appellate panel affirmed the judgment against the surety, even though the owner allegedly had not paid the general contractor. The panel held that a “surety, which has issued a statutory bond governed by the provisions of the Public Works Act,” may not “rely on a ‘pay if paid’ clause in a principal's subcontract as a defense to payment of sums owed to subcontractors which have performed work and supplied materials on a public construction project.” 113

From the opinion in the Glencoe case, it appears that contractor and surety did not argue and the panel may not have considered the fact that La. R.S. 38:2242(A) defines a claimant as a party “to whom money is due under a contract,” and that La. R.S. 38:2242(B) only allows such a claimant to file a statement of the amount due “after the maturity of his claim.” Instead, according to the opinion, the contractor and surety relied on the articles in Louisiana’s Civil Code that make a surety’s obligation an accessory obligation to that of the principle, and that, generally, allow sureties to assert any defenses available to their principles.

The Glencoe panel refused to apply the general rules of suretyship, because the Public Works Act is sui generis. Apparently unaware of the unpublished Coastal Development opinion, issued a few months earlier, the panel stated that the issue before it was res nova in  Louisiana.114 It cited a number of out-of-state cases that, on public policy grounds, had refused to let sureties rely on conditional payment clauses. The panel then concluded that the pay-if-paid clause in the subcontract was “contrary to the purpose of the Public Works Act.”115

One distinction between Coastal Development and the Glencoe case lies in the fact that the former addressed the liability of a general contractor and the latter addressed only the liability of the surety in the case. Whether that distinction should make a difference is arguable.

According to La. R.S. 38:2247, a party must still be a “claimant” as defined in La. R.S. 38:2242(A) to sue the surety on the bond.116 Moreover, La. R.S. 38: 2241(A)(2), in describing the requirements of the statutory bond required by the Public Works Act, says that “the public entity shall require of the contractor a bond . . . for the payment by the contractor or subcontractor to claimants as defined in R.S. 38:2242.” 117 A party must have a mature contract claim to be a “claimant,” and a party must be a “claimant” to bring a statutory Public Works Act claim – against either the contractor or the surety. This supports an argument that the Public Works Act should not override the effect of an otherwise valid conditional payment clause as to either the contractor or the surety.

Courts outside of Louisiana have found other ways to avoid applying conditional payment clauses. One such tactic has been to apply what they call the “prevention doctrine.” Where a general contractor prevents the owner from paying him, courts will sometimes refuse to enforce conditional payment clauses. For these courts, a general may not take advantage of an owner’s failure to pay that the general himself caused. For example, where the general contractor’s questionable actions prevented lenders from providing the funds needed to pay the general, the federal Fourth Circuit refused to enforce a pay-if-paid clause.118

Some courts have applied the “prevention doctrine” where the general contractor has settled or otherwise failed to pursue its claim for payment from the owner. In these cases, by settling without obtaining payment sufficient to pay the subcontractor, the general contractor improperly “prevented” the occurrence of a condition precedent and thereby waived the benefit of a pay-if-paid clause. These cases have occasionally added as an alternative rationale that the general’s settlement meant that the general had been “paid” within the meaning of the pay-if-paid clause, and that this actually satisfied the condition precedent.119

Such cases usually involve some level of culpability on the part of the general, rather than a good faith compromise.120 La. Civ. Code art. 1772 might support the application of a version of the “prevention doctrine” in Louisiana in the right case. Article 1772 says that “[a] condition is regarded as fulfilled when it is not fulfilled because of the fault of a party with an interest contrary to the fulfillment.” In fact, one older case suggested in dicta that, under Article 1772’s predecessor article in the Civil Code, former Article 2040,121 an unexplained failure by a general contractor even to request payment after a nearly two year delay might satisfy a conditional payment clause.122

Significantly, Louisiana’s Article 1772 requires a showing of “fault.” In discussing former Article 2040, the Louisiana Supreme Court said that the principle of the rule is “derived from the premise [that] one should not be able to take advantage of his own wrongful act.”123 Moreover, application of Article 1772 has been rejected where the oblige failed to prove that, but for the obligor’s actions, the condition would have been fulfilled and the obligee paid in full.124 A good faith settlement of a seriously contested claim therefore  should not implicate Article 1772.

1 La. R.S. 9:4801.
“Subcontractor” under the Private Works Act, includes a sub-subcontractor. La. R.S. 9:4807(C).
La. R.S. 9:4802.
La. R.S. 9:4802(C); La. R.S. 9:4811; La. R.S. 9:4812.
La. R.S. 9:4802(D) (“Claims against the owner and the contractor granted by this Part are in addition to other contractual or legal rights the claimants may have for the payment of amounts owed them.”).
6La. R.S. 9:4822.
La. R.S. 9:4811(D).
La. R.S. 9:4822(B). Where a notice of substantial completion was recorded before the project architect had approved final payment, it was held that the sixty day lien period began to run against the general contractor’s privilege from the recording of the notice of substantial completion. Even though, under the contract, payment was not even due until the architect approved it, the court said that the clock nevertheless started under the statute upon the earlier recordation of the substantial completion certificate. Bank of Bernice v. D'Arbonne Lake Lodge, Inc., 541 So.2d 354 (La. App. 2nd Cir. 1989).
La. R.S. 9:4822(C).
La. R.S. 9:4822(A).
La. R.S. 9:4822(C).
La. R.S. 9:4822(D)(2).
Thompson Tree & Spraying Service, Inc. v. White-Spunner Const., Inc., 68 So.3d 1142, 1151 (La. App. 3rd Cir. 2011)(“[W]here the notice of contract was filed, but the notice of termination was not filed or was defective, the applicable tolling period for filing a statement of claim or privilege is in La.R.S. 9:4822(A). To begin the tolling period, a notice of termination must be filed. If a notice of termination was not filed or was defective, then the tolling period does not begin to run.”); In re Whitaker Constr. Co., Inc., 439 F.3d 212 (5th Cir.2006); Bernard Lumber Co., Inc. v. Lake Forest Constr. Co., 572 So.2d 178, 181 (La. App. 1st Cir. 1990)(“where an owner has neglected to file a notice of termination, the 30–day period provided for in La. R.S. 9:4822(A) never begins to run.”).
La. R.S. 9:4822(J).
La. R.S. 9:4823(B).
La. R.S. 9:4803.
George Kellett & Sons, Inc. v. Schwartz Industries, Inc., 107 So.2d 815 (La. 1959); Jim Walter Corp. v. Laperouse, 196 So.2d 539 (La. App. 3rd Cir. 1967); Lambert Bros., Inc. v. Ziegler, 361 So.2d 948 (La. App. 4th Cir. 1978).
La. R.S. 9:4814.
La. R.S. 9:4813(E) (surety); La. R.S. 9:4823(A)(owner and contractor). The time period is peremptive, i.e., it is not interrupted by acknowledgment or some other method other than the filing of suit. Metropolitan Erection Co., Inc. v. Landis Construction Co., Inc., 627 So.2d 44 (La. 1993); Herschell Corp. v. Fireman’s Fund Ins. Co., 743 So.2d 698 (La. App. 3rd Cir. 1999).
Herschell Corp. v. Fireman’s Fund Ins. Co., 743 So.2d 698 (La. App. 3rd Cir. 1999).
La. R.S. 9:4823(C); Abry Brothers, Inc. v. Tillman, 162 So.2d 346 (La. 1964); State Lumber & Supply, Inc. v. Gill, 259 So.2d 639 (La. App. 1st Cir. 1972); Prattini v. Poirier, 305 So.2d 555 (La. App. 4th Cir. 1974).
La. R.S. 9:4833(E). Because the lis pendens notice must be filed one year from the recordation of the statement of claim, this may effectively shorten the period of time for filing suit in order to preserve the privilege. Whereas the suit may be filed within one year from the deadline for recording the statement of claim, if the claimant files the statement of claim early, the one year period for the lis pendens filing begins to run from that date. Because the lis pendens notice may not be recorded until suit has been filed, this means that the suit also must be filed within one year from the actual recordation date, rather than one year from the deadline for recordation of the statement of claim.
La. R.S. 9:4833. E. Smith Plumbing, Inc. v. Manuel, 88 So.3d 1209 (La. App. 3rd Cir. 2012) allowed landowners to obtain an award of general damages against a lien claimant who did not voluntarily cancel his statement of claim where the claim caused “anxiety” to the landowners.
La. R.S. 9:4833 gives the owner or interested person the right to bring “an action pursuant to R.S. 44:114.” La. R.S. 44:114 provides for an action against the recorder of mortgages and conveyances that may be instituted by a writ of mandamus. LA C.C.P. Art. 3822 provides for the summary trial of mandamus proceedings.
La. R.S. 9:4835.
La. R.S. 9:4841.
In 1997, the Legislature enacted procedures that largely mirror those of the Louisiana Public Works Act to govern claims on projects of the Louisiana Department of Transportation and Development. La.R.S. 48:256.3 et seq. Several courts of appeal have said that on DOTD projects these provisions will govern to the exclusion of the Public Works Act. Martin Marietta Materials of La., Inc. v. United States Fidelity and Guar. Co., 940 So.2d 152 ( La. App. 2nd Cir. 2006), ; Gilchrist Constr. Co., Inc. v. Terral RiverServices, Inc., 819 So.2d 362 (La. App. 3rd Cir. 2002), writ denied 828 So.2d 1119 (La. 2002); Don Bihm Equip. Co., Inc. v. Louisiana Dept. of Transp. and Dev., 64 So.3d 897 (La. App. 1st Cir. 2011).
State, Div. of Admn. v. McKinnis Bros. Const., 701 So.2d 937, 944 n.6 (La. 1997); Metro Builders Hardware, Inc. v. Burko Const., Inc., 633 So.2d 838, 839 (La. App. 4th Cir. 1994).
La. R.S. 38:2241.
La. R.S. 38:2242.
Thurman v. Star Electric Supply, Inc., 307 So.2d 283 (La.1975); AFCO Metals, Inc. v. Tudor Const. Co., 571 So.2d 698 (La. App. 2nd 1990).
35La. R.S. 38:2242 (B).
La. R.S. 38:2241.1; La. R.S. 38:2242(B). La. R.S. 38:2241.1 says that the recommendation of the project architect or engineer “may be made upon completion or substantial completion of said public works within thirty days of completion of the project.” In the case of In re Whitaker Const. Co., Inc., 411 F.3d 197 (5th Cir. 2005), the federal Fifth Circuit relied on this language to say that an acceptance filed more than thirty days before actual completion would be premature, and that the acceptance would not become operative until later. On the facts of the case, the court did not need to decide when the earliest operative date would be, because, even counting from actual completion, there were no timely filed statements.
La. R.S. 38:2242(D).
Thurman v. Star Electric Supply, Inc., 307 So.2d 283, 285 (La. 1975) (“The effect of this [recordation under La. R.S. 38:2242(B)] is twofold: first, it accords to those not enjoying contractual privity with the general contractor a right of action against both the contractor and his surety; second, upon the filing and recordation of the affidavit of claim, any payment made by the governing authority without deducting the amount of the claim renders the authority liable for the claim.”)(emphasis added).
Interstate School Supply Co. v. Guitreau’s Construction and Consulting Co., Inc., 542 So.2d 138 (La. App. 1st Cir.1989)(upholding dismissal of claims against surety where statement not filed timely); John F. Sanchez Plumbing Company, Inc. v. Aetna Casualty & Surety Co., 564 So.2d 1302 (La. App. 1st Cir. 1990)(upholding dismissal of direct subcontractor’s claim against surety “on the bond,” but maintaining contract claims against the general contractor where statement not filed timely).
State, Div. of Admn. v. McKinnis Bros. Const., supra, 701 So.2d at 944 n.6.
John F. Sanchez Plumbing Company, Inc. v. Aetna Casualty & Surety Co., 564 So.2d 1302 (La. App. 1st Cir. 1990), supra; Federal Ins. Co. v. Community State Bank, 905 F.2d 112, 115 (5th Cir. 1990) (“Even if La.R.S. 38:2247 is interpreted to require the filing of a lien within 45 days in order to maintain a right of action on the bond, such is not required to maintain a right of action against Ragusa as the contractor. . . .”).
La. R.S. 38:2247.
Bob McGaughey Lumber v. Lemoine Co., 590 So.2d 664 (La. App. 3rd Cir.1991); K Const., Inc. v. Burko Const., Inc., 629 So.2d 1370 (La. App. 4th Cir. 1993).
La. R.S. 38:2247.
La. R.S. 38:2246.
La. R.S. 38:2242.1.
La. R.S. 38:2242.2.
D & J Construction Co., Inc., v. Mid-Continent Stone Co., Inc., 571 So.2d 762 (La. App. 2d Cir. 1990).
La. R.S. 38:2243.
La. R.S. 38:2244.
La. R.S. 38:2248(A).
La. R.S. 38:2248(B). 53The Miller Act does not apply to claims by contractors against the federal government. Contractors must proceed under the provisions of the Contract Disputes Act, 41 U.S.C. 7101- 7109.  This paper will not examine in detail the provisions of the CDA or the jurisprudence under that law. Generally, however, the CDA requires that contract claims against an executive branch agency be submitted for decision first to an agency contracting officer. The officer’s decision is final unless a timely appeal is taken to the agency’s board of contract appeals or the contractor brings a timely suit in the United States Court of Federal Claims. Either the contractor or the government may appeal a decision of the board of contract appeals or the Court of Federal Claims to the United States Court of Appeals for the Federal Circuit. 5440 U.S.C. § 3131.
40 U.S.C. § 3131(b).
Id. and 40 U.S.C. § 3133(b).
40 U.S.C. § 3131(b).
40 U.S.C. § 3132.
Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., 322 U.S. 102, 64 S.Ct. 890, 88 L. Ed. 1163 (1944).
J. W. Bateson Co. v. United States ex rel. Bd. of Trustees, etc., 434 U.S. 586, 98 S. Ct. 873, 55 L. Ed. 2d 50 (1978).
Clifford F. MacEvoy Co. v. United States ex rel. Calvin Tomkins Co., supra.
40 U.S.C. § 3133(b)(3)(A).
Hendry Corp. v. American Dredging Co., 318 F.2d 299 (5th Cir. 1963).
40 U.S.C. § 3133(b)(1).
40 U.S.C. § 3133(b)(2).
40 U.S.C. § 3133(b)(4).
40 U.S.C. § 3133(b)(3)(B); Bernard Lumber Co. v. Lanier-Gervai Group, 560 So. 2d 465 (La. App. 1st Cir.1990); General Equipment, Inc. v. U. S. Fid. & Guar. Ins. Co., 292 So.2d 806 (La. App. 1st Cir. 1974).
40 U.S.C. § 3133(b)(3)(B).
40 U.S.C. § 3133(b)(1).
F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., Inc., 417 U.S. 116, 126- 31, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974).
United States ex rel. Varco Pruden Bldgs. v. Reid & Gary Strickland Co., 161 F.3d 915 (5th Cir.1998); U.S. ex rel. Cal’s A/C and Elec. v. Famous Const. Corp., 220 F.3d 326 (5th Cir. 2000) (recovery against surety only available under Miller Act for unpaid balance, but attorney’s fees available against contractor under La. R.S. 9:2784.).
Cajun Constructors, Inc. v. Fleming Const. Co., Inc., 951 So.2d 208 (La. App. 1st Cir. 2006); U.S. ex rel. Cal’s A/C and Elec. v. Famous Const. Corp., 220 F.3d 326 (5th Cir. 2000) (allowing state law attorney’s fee claim agains the contractor but not the surety).
United States ex rel. Carter Equip. Co. v. H.R. Morgan, Inc., 554 F.2d 164, 165–66 (5th Cir.1977) (per curiam).
United States ex rel. Georgia Elec. Supply Co. v. United States Fidelity & Guaranty Co., 656 F.2d 993, 997 (5th Cir.1981) disapproved on other grounds, West Virginia v. United States, 479 U.S. 305, 107 S.Ct. 702, 93 L.Ed.2d 639 (1987) (Allowance of pre-judgment interest to a Miller Act plaintiff is an issue of federal law. However, since the Miller Act says nothing about interest, we “look to state law as a matter of convenience and practicality.”).
U. S. for Use and Benefit of Pratt Farnsworth, Inc. v. Talley, 294 F. Supp. 1345 (E.D. La. 1969).
40 U.S.C. § 3133(b)(1).
United States ex rel. Mandel Bros. Contracting Corp. v. P. J. Carlin Construction Company, 254 F. Supp. 637 (E.D. N.Y. 1966).
United States f/u/b T.M.S. Mechanical Contractors, Inc. v. Miller’s Mutual Fire Insurance Co., 942 F.2d 946 (5th Cir. 1991); United States of America for the Use and Benefit of Lochridge-Priest, Inc., v. Con-Real Support Group, Inc., 950 F.2d 284 (5th Cir. 1992).
United States f/u/b T.M.S. Mechanical Contractors, Inc. v. Miller’s Mutual Fire Insurance Co., supra, at 952 (emphasis by court).
La. R.S. 9:2784(A).
La. R.S. 9:2784(C).
508 So.2d 170 (La. App. 4th Cir.1987).
Congress Square Ltd. Partnership v. Polk., 2011 WL 837144, *5 (E.D.La. 2011).
Barco Projection Systems, Inc. v. Alliance Business Products, Inc., 2003 WL 21355467,*2 (E.D.La. 2003).
996 So.2d 969 (La. 2008).
See, e.g., Kenner Industries, Inc. v. Sewell Plastics, Inc., 451 So.2d 557 (La. 1984); Barco Projection Systems, Inc. v. Alliance Business Products, Inc., supra, (“Historically, a construction contract has not been treated as an open account.”; Greenfield Commercial Credit, L.L.C. v. Catlettsburg Refining, L.L.C., 2007 WL 97068, *6 (E.D. La. 2007)(“ The dealings between defendants and Pipeworks constitute a construction contract. Jacobs contracted for Pipeworks to provide materials for use in specific construction project. The parties did not agree to a course of dealings over a period of time. Rather, they agreed on specific contracts for a specific project-albeit a contract and project that would take considerable time to complete. Such an agreement is a construction contract.”).
Acadian Services, Inc. v. Durand, 813 So.2d 1142, 1144 (La.App. 3rd Cir. 2002).
Id., (emphasis added).
Builders Supply of Ruston, Inc. v. Qualls, 750 So.2d 427 (La. App. 2nd Cir. 2000). owner 92Austin v. Parker, 672 F.2d 508 (5th Cir. 1982) (awarding penalties and attorney’s fees under former La. R.S. 22:658).
93 La. R.S. 22:1973 also may help recovery against an insurer in the proper case. That statute imposes an obligation of good faith and fair dealing on insurers, and a violation of that duty can justify an award of treble damages resulting from the breach.
507 So.2d 198 (La. 1987).
707 So.2d 500 (La. App. 4th Cir.1998).
96See also, Vector Elec. & Controls, Inc. v. J.E. Merit Constructors, Inc., 2006 WL 3208462 (La. App. 1st Cir. 2006)(subcontract language making payment from owner to general a “condition precedent” to subcontractor’s right to receive payment involved pay-if-paid clause); Coastal Development Group, L.L.C. v. International Equipment Distributors, Inc., 2011 WL 766608 (La. App. 1st Cir. 2011) (multiple clauses in subcontract that conditioned obligation to pay debris removal subcontractor on payment by FEMA to Parish and by Parish to general contractor created suspensive condition, and, hence, pay-if-paid situation).
Chartres Corp. v. Charles Carter and Co., 346 So.2d 796 (La. App. 1st Cir.1977) (Stating that “[w]hat constitutes a reasonable time must be determined by the circumstances of each case,” and finding that twenty-three months of nonpayment was more than a reasonable time unless the general contractor had a reasonable explanation for the delay.).
Superior Steel, Inc. v. Woodrow Wilson Const. Co., Inc., 2008 WL 4780248 (La. App. 1st Cir. 2008).
United States f/u/b T.M.S. Mechanical Contractors, Inc. v. Miller’s Mutual Fire Insurance Co., 942 F.2d 946, 949 n. 6 (5th Cir. 1991).
U.S. ex rel. U.S. Glass, Inc. v. Patterson, 2014 WL 442853 (E.D.Pa. 2014) (citing the Fifth Circuit’s decision, supra, and the Ninth Circuit’s decision in U.S. ex rel Walton Tech., Inc. v. Weststar Eng'g, Inc., 290 F.3d 1199 (9th Cir.2002), and saying that “All of the district courts to have considered the issue appear to have reached the same conclusion. . . . Several of these cases have deemed it to be a ‘well established’ or ‘well settled’ point of law that a pay-when-paid clause does not constitute a defense to a subcontractor's Miller Act claim.”).
102Merit Elec., Inc. v. Motiva Enterprises, LLC, 2011 WL 900306, *4 n15 (M.D. La. 2011).
Builder's Iron, Inc. v. Western Sur. Co., 2012 WL 2406026,*5 (E.D.La. 2012) (Brown, J.)(“[I]n Louisiana a surety is liable to a subcontractor even when the principal has not paid the general contractor, and the surety may not avoid this liability on the basis of a pay if paid clause”); E. Cornell Malone Corp. v. Sisters of the Holy Family, St. Mary's Academy of the Holy Family, 2012 WL 1886055, *6 (E.D. La. 2012) (Brown, J.)(same).
Aesco Steel, Inc. v. J.A. Jones Constr. Co., 621 F.Supp. 1576, 1582 (E.D. La.1985).
Imagine Construction, supra, 707 So.2d at 502-03.
Id. (“Argument has been raised in our case by plaintiff that were we to conclude that the instant action is premature, plaintiff might very well be faced with a defense of peremption at a later time to be raised by the surety or sureties.”).
Electrical Supply Co. v. Eugene Freeman, 152 So. 510, 512 (La. 1934) (“And, since the bond herein given is a statutory bond, we must look to the statute under which the bond was given to find the conditions of the bond; for whatever is written in it, nor required by the statute, must be read out of the bond, and whatever is not expressed in it, but which ought to have been incorporated, must be read into it.”); Bowles & Edens Co. v. H & H Sewer Systems, Inc., 324 So.2d 528, 532 (La. App. 1st Cir.1976) (“ The interpretative precept of reading into the bond that which is lacking for security of those protected by the bond, particularly those provided in R.S. 9:4802 and 4803 and reading out of the bond those provisions not required by the statute, is applicable to a statutory bond furnished under and recorded with the contract between the owner and contractor herein.”); H. G. Angle Company, Inc. v. Talmadge, 410 So.2d 1151, 1154 (La. App. 3rd Cir.1981) (“Although Seaboard attempted to limit its liability as surety by the terms of its bond, once a contract and bond have been properly entered into and recorded in compliance with the Private Works Act, the bond is considered as being a statutory bond, and incorporates by reference all of the provisions of the Private Works Act. As such, the parties are not free to delimit liability of the surety on the bond.”).
La. R.S. 38:2242(A).
La. R.S. 38:2242(B).
2011 WL 766608,*3 n.5 (La. App. 1st Cir. 2011).
Id. at*3 n.5 (“the LPWA defines a ‘claimant’ ‘as any person to whom money is due pursuant to a contract.’ . . . LSA–R.S. 38:2242(A). We determined Coastal is not yet due money under the subcontract; therefore, Coastal was not a proper claimant under the LPWA.”).
65 So.3d 225, (La. App. 1st Cir. 2011).
Id., at 230.
Id., at 231.
Id., at 233.
“Nothing in this Part shall be construed to deprive any claimant, as defined in this Part and who has complied with the notice and recordation requirements of R.S. 38:2242(B), of his right of action on the bond furnished pursuant to this Part, provided that said action must be brought against the surety or the contractor or both within one year from the registry of acceptance of the work or of notice of default of the contractor. . . .” (emphasis added).
Emphasis added.
Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717 (4th Cir. 2000) (applying Virginia law). The court called the provision a “pay when paid” clause, but the clause contained “condition precedent” language and the opinion discussed the clause as though it were a payif-paid clause.
See, e.g., Urban Masonry Corp. v. N & N Contractors, Inc., 676 A.2d 26, 36 (D.C. 1996) (“[T]he condition precedent was satisfied . . . when Urban settled its claims against Blake. Alternatively, even if the walk-away settlement did not satisfy the condition precedent, Urban still breached the contract by failing to protect N & N's interest in the settlement agreement. At the time of the settlement, Urban knew of N & N's outstanding claim for additional compensation and of the ‘pay if paid’ condition. Nonetheless, Urban agreed to a settlement that failed to secure payments for N & N, thus breaching the implied condition which imposed the duty, on the parties, not to frustrate the fulfillment of the condition precedent. Urban cannot benefit from its willful hindrance of the condition precedent, and is therefore, liable for its breach of the Urban/N & N sub-contract.”).
In the Urban Masonry case, the subcontractor had a legitimate claim for additional work that the general simply failed to address in the settlement with the owner.
Article 1772 replaced Article 2040 in the Civil Code. Article 2040 formerly provided that “The condition is considered as fulfilled, when the fulfillment of it has been prevented by the party bound to perform it.”
Chartres Corp. v. Charles Carter & Co., Inc., 346 So.2d 796 (La. App. 1st Cir. 1977).
Gibbs Const. Co., Inc. v. Thomas, 500 So.2d 764, 766 (La. 1987)(emphasis supplied).
Copeland v. Merrill Lynch & Co., Inc., 162 B.R. 743, 747 (E.D La. 1993).should not implicate Article 1772.

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