Pay-When-Paid Clauses Unenforceable

In the recent case of Crosno Construction Inc. v. Travelers Casualty, the Fourth District California Court of Appeals decided that an industry standard “pay-when-paid” contract clause (part of the AGC Short Form Subcontract) was ruled void and unenforceable. The ruling was based on the grounds that the pay-when-paid clause violated state public policy because it did not provide for payment to the subcontractor within a reasonable time since payment was delayed indefinitely for as long as it took the general contractor to pursue its claim against the project owner.


Practical Considerations:


  • Subcontractors of public works projects should review existing subcontracts to determine whether pay-when-paid provisions in their contract complies with the Crosno ruling.
  • If subcontractors on public works projects have been waiting for payment for an extended period of time due to nonpayment by the owner, recovery on a payment bond claim prior to the resolution of the dispute between the general contractor and the owner may be a feasible option. Sub-contractors in this situation may wish to first send a demand for payment to the general con-tractor citing the Crosno case.


Before taking action, it is recommended that public works subcontractors consult with their firm’s attorney to ask about their remedies under Crosno and what avenues to payment may be available to them.


As an LAPFCA member, you have access to our legal counsel. Please respond to this email if you’d like to utilize this option.


Click here to read the memo from legal on the case.

Click here to read the case itself.

Recent Posts

WPCCA Webinar: How Technology is Transforming the Construction Industry

Technology is driving dramatic changes throughout the construction industry and every company is being affected. There is growing use of established software solutions while a host of emerging technologies and digital processes are rapidly gaining traction. Users are learning to…

February 29, 2024

WPCCA Microsoft Project Level 1 Course – Lesson 1

Join us for our first lesson of Microsoft Project Level 1 Course taught by Microsoft Certified Professional, James Law. This lesson will provide training on getting started with Microsoft Project. Attendees will learn how to identify project management concepts from…

February 27, 2024

HubSpot Platform Demo and Q&A

Join us learn more about HubSpot– a holistic customer platform that makes it easy for an entire company to work together — from marketing and sales to customer service. HubSpot provides an all-in-one solution. This demo will focus on their…

February 15, 2024

WPCCA Economic Outlook Webinar: The Good, The Bad, & The Ugly

Has the Federal Reserve successfully engineered a soft landing?  Or, is the confluence of geopolitical conflict, a presidential election, rising consumer debt levels, and still high interest rates conspiring to produce economic downturn in 2024?  It is difficult to know…

January 30, 2024

Clarity On State Law & Drug Testing In The Construction Industry

In 2022, Governor Newsom signed legislation (AB 2188) making cannabis users a protected class of employee. AB 2188 contained a delayed implementation date and took effect on January 1, 2024. The measure prohibited employers from discriminating in hiring, firing or…

January 29, 2024