When we discuss conditions precedent or conditional payment on the blog, we are almost always referencing pay if paid or pay when paid contracts. Under both contracts, the author of the contract attempts to shield itself from liability. Most states disfavor pay if/when paid contracts, but it is unclear how they will be treated in Wyoming. Recently, a condition precedent was enforced in a Wyoming construction contract that blocked the recovery of payment. Well, the contract was actually a lease, but the provision covered construction on the premises. While not a pay if paid or pay when paid contract, this decision should catch the eye of construction workers in the state.
Wyoming Construction Contracts and Conditional Payment
Conditional payment is generally looked down upon in construction. Courts typically find that payment is earned at the time that work is completed, not at the occurrence of a suspensive condition. However, some states, including Wyoming, haven’t really made a stand one way or another. Because it is largely unclear how Wyoming courts will treat pay if paid and pay when paid contracts, any insight is welcome. In a recent case, the Wyoming Supreme Court showed that it is willing to give weight to a condition precedent to payment in a construction contract.
Get free mechanics lien form
We're the mechanics lien experts. We offer forms made by attorneys and trusted by thousands.
The Facts
Here’s the full text of P&N Investments v. Frontier Mall Associates.
P&N Investments (“P&N”) leased space from Frontier Mall Associates (“Frontier”) to open a Dickey’s Barbecue restaurant. Under the contract, Frontier would provide P&N a “finish allowance” (a payment of $150K) once P&N provided Frontier with
“…evidence satisfactory to Landlord from its general contractor and any subcontractors that any and all liens that have been, or may be, filed have been satisfied of record or waived and an affidavit that all work has been paid for[.]”
Fast forward to the end of the project.
Upon completion of the work, P&N had paid its GC all amounts due and no liens were filed on the property. No liens were filed on the property, and eventually the deadline to file a lien passed. Because liens could no longer be filed on the property, P&N assumed it was entitled to the finish allowance from Mall. When P&N called for the payment, however, they were rebuffed. According to Mall, the payment was not due until P&N provided an affidavit stating that all of the work had been paid for. In fact, P&N’s general contractor failed to make payments to subcontractors in the course of the project, but the subs did not file liens. P&N claimed it was entitled to payment anyway and filed suit.
The Court
P&N argued that because they had made all of its required payments, they were entitled to the finish allowance. Frontier countered, claiming that the contract stated the finish allowance would only be paid after P&N provided “an affidavit that all work has been paid for.” P&N’s general contractor did not pay its subs, so not all work had been paid for. P&N could not provide the affidavit.
Conditions precedent can get complicated, but the Wyoming Supreme Court’s analysis was not. The court simply looked at the exact wording of the contract and determined that a condition precedent had been created limiting the payment of the finish allowance. Because that condition had not been met, the court decided P&N was not entitled to payment.
Takeaway
This may be a simple case, but it could have big implications for Wyoming construction contracts. As mentioned previously, it is one of the states where the neither the courts nor the legislature has taken a stand against pay if paid or pay when paid contracts. Here, the court showed that it was willing to apply a condition precedent relating to construction payment by looking at nothing but the text of the contract. Considering that pay if paid and pay when paid contracts are disallowed in other states due to policy reasons, this cold, calculated analysis of the contract could hint that conditions precedent are not as disfavored in Wyoming construction contracts.
For more on the laws surrounding Wyoming construction contracts, check out our Wyoming Construction Payment Resources. Not in Wyoming? Select your state.
