Avoid Costly  Legal Mistakes With Miller Act Pay When Paid Clause In Your Independent Contractor Agreement

Miller Act Pay When Paid Clause for Subcontractors

Government construction contractors can quickly find themselves in a dispute when applying the Miller Act pay if paid clause. This tool is often used to shield prime contractors from paying their subs when the agency does not pay.

Under the Miller Act, failing to pay subcontractors simply because the government has not paid can be a dangerous mistake. Such provisions are void as contrary to the language and policy of the Miller Act. See 40 U.S.C.A Section 3133(c).

If there is a performance issue related to the independent contractor agreement, then the subcontractor cannot expect to receive payment under the Miller Act Pay When Paid Clause simply because there is a material dispute as to performance.

  • Prime contractors should make sure that there is a valid reason for non payment of invoices and not simply hold up payment because the government has not paid them.

Delay for Invoices Submitted to Agency: When the subcontractor submits an invoice to the prime, and the prime submits to the agency, the Miller Act Pay When Paid independent contractor clause should not be used to delay payment to the subcontractor.

  • If the agency has a problem with the specific part of the subcontractor’s work, then this could be a valid reason for non payment.
  • These are legal issues that a very fact specific – the prime should not proceed unless it seeks legal advice from a government construction attorney.

Miller Act Pay if Paid Clause Terms – The Impact on Independent Contractor Clause

 Subcontractors can very well take the position that under the Miller Act when facing a problem with a pay if paid clause in the subcontract. Courts have ruled that independent contractors  are entitled to recover what is in effect the “benefit of the bargain” based on the fixed price Subcontract, even if that measure of recovery is not specifically authorized under the subcontract.  

Courts have also come to this legal conclusion in the Fourth Circuit by stating that the Miller Act’s requirement of prompt payment applies, even if it is in conflict with the terms of an applicable independent contractor clause in the agreement. Therefore, a surety company may not withhold payment under the payment bond based on the Miller Act Pay When Paid Clause.

  • To suggest that non-payment by the Owners absolves the surety of its obligation is nonsensical because it defeats the very purpose of a payment bond.

For legal help in deciding your rights under the Miller Act Pay When Paid independent contractor clause, call our government construction lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.

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