Problems Can Arise When Using One Contract in Multiple States

Bowie & Jenson's Construction Law Forum blog just posted about a case out of the U.S. Fourth Circuit that demonstrates problems that may arise when a contractor uses one form contract in two different states.  In the 4th Circuit case discussed, Universal Concrete Products v Turner Construction Company, Maryland and Virginia were the bordering states involved, and the legal issue related to a "pay when paid" provision. In Virginia, "pay when paid" provisions conditions any payment to a subcontractor on the general contractor receiving payment from the owner.   If the general contractor never receives payment, the general contractor never needs to pay the subcontractor. In Maryland, however, the "pay when paid" provision is not so strong.   Maryland distinguishes "pay when paid" clauses from "pay if paid" clauses, considering the first type of provision one requiring payment to the subcontractor within a "reasonable time" after work is concluded, and the second type of provision requiring payment only if and after payment is received from the owner. The subtle difference in the law was a big difference to the general contractor, who was likely using the same contract in both Maryland and Virginia. While we don't practice in Maryland and Virginia, the problem here isn't isolated to those two states.    This problem can arise between any two bordering states. Our clients in Washington and Oregon frequently work in each other's state.  Our clients in Louisiana frequently work in Mississippi or Texas.   While "business" between the two states may feel seamless to the business owners, the laws can be drastically different.
Scott Wolfe About the Author: Scott Wolfe
Scott Wolfe, Jr. obtained his J.D. degree from Loyola University of New Orleans, and his B.A. from Southern Methodist University in Dallas, TX. In 2006, 2007, 2008 and 2009, Scott was recognized as a Leader in Law by CityBusiness Magazine. The son and grandson of general contractors, Scott is a construction litigator in the Pacific Northwest, and the founding member of the bi-coastal law firm, Wolfe Law Group. Scott is also the founder and CEO of Express Lien, Inc., a legal document preparation service for contractors. In 2008, City Business Magazine recognized Scott as one of its Innovators of the Year for the Express Lien concept. As an entrepreneur himself, Scott has a strong background in business and commercial transactions and laws. He focuses his practice on the legal issues facing the construction industry, and has represented clients in multi-million dollar construction disputes in litigation and alternative dispute resolution proceedings. Scott is a LEED AP.

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