Pay-When-Paid Clauses Enforceable in Virginia

Virginia, unlike some other states, adheres to a policy favoring freedom to contract. Virginia law treats most businesses and individuals as presumptively capable of negotiating in their own best interests, and when a deal is reached and a contract is signed, courts rarely interfere with the result, however unfair that result may seem to outside parties.

In construction contracts, for example, it is common to find a "pay when paid" clause, stating that a subcontractor's right to any payments from the general contractor is expressly conditioned on the general contractor's first receiving payment from the owner. Some states go out of their way to protect subcontractors from the potential harsh consequences such a provision can cause. Virginia courts, however, will assume that the subcontractor was sophisticated enough to know what it was signing and will enforce contracts as written.

Read the rest of the article at the Virginia Business Litigation Lawyer blog