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CONSTRUCTION CONTRACTS: “Pay-if-paid” term in subcontract that requires surrender of right to timely payment is void. APCO Construction, Inc., the general contractor on a mixed-use development project, entered into a subcontract with Zitting Brothers Construction, Inc. to perform wood framing, sheathing, and shimming work. The subcontract required APCO to pay Zitting for 100 percent of work completed during the prior month minus 10 percent for retention within 15 days of APCO receiving payment from the project owner. The payment was expressly conditioned on APCO’s receipt of final payment from the owner and Zitting’s delivery of a release and waiver of claims. The contract provided that if the prime contract was terminated, APCO would pay Zitting for completed work after the owner paid APCO. After the project was shut down, Zitting sued the owner and APCO for breach of contract and foreclosure of its mechanic’s lien. APCO asserted the affirmative defense of the contract conditions. The trial court granted summary judgment to Zitting based on a Nevada statute that requires prompt payment and makes void contract terms that require a subcontractor to waive its statutory rights, its rights to damages, or time extensions or that operate to relieve a general contractor of its statutory obligations. Nev. Rev. Stat. § 624.628. On appeal, the supreme court took the opportunity to clear up confusion in its rulings on the enforceability of “pay-if-paid” provisions. It stated that such clauses are not per se void and unenforceable but must be evaluated on a case-by-case basis. Here, the provision in the subcontract that conditioned payment to Zitting solely upon APCO receiving payment from the owner was unmistakably a “pay-if-paid” provision, which by its terms nullified Zitting’s statutory right to prompt payment and limited its recourse under a mechanics’ lien. The provision was therefore void and unenforceable. APCO Constr., Inc. v. Zitting Bros. Constr., Inc., 473 P.3d 1021 (Nev. 2020).
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