BENTLEY CONST. DEV. & ENG. INC. v. All Phase Elec. & Maintenance, Inc.
1990 WL 72116, 562 So. 2d 800, 1990 Fla. App. LEXIS 3948 (1990)
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Rule of Law:
A subcontract payment provision that links a subcontractor's payment to the general contractor's receipt of payment from the owner will be interpreted as setting a reasonable time for payment, not as a condition precedent, unless it contains clear and unambiguous language expressly shifting the risk of owner nonpayment to the subcontractor.
Facts:
- Bentley Construction Development & Engineering Inc. (Bentley), a general contractor, entered into a subcontract with All Phase Electric & Maintenance, Inc. (All Phase) for work on a construction project.
- The subcontract contained a payment clause stating, 'Subcontractor shall be entitled to receive all progress payments and the final payment within ten working days after contractor receives payment for such from the owner...'
- A separate provision in the subcontract allowed Bentley to hold five percent of retainage until it received final payment from the owner.
- All Phase completed its work as required by the subcontract.
- Bentley failed to make final payment to All Phase, asserting that the project owner had not yet paid Bentley.
- Peerless Insurance Company served as the surety for Bentley on the project.
- At Bentley's request, All Phase transferred a billing of $1,387 from a different project onto the invoice for the project in dispute.
Procedural Posture:
- All Phase Electric & Maintenance, Inc. filed suit against Bentley Construction Development & Engineering Inc. and its surety, Peerless Insurance Company, in a Florida trial court.
- After a nonjury trial, the trial court entered a final judgment in favor of the subcontractor, All Phase Electric.
- The trial court found that Bentley was not entitled to a setoff for delay damages and awarded All Phase Electric principal amounts due, prejudgment interest, and attorney's fees.
- Bentley Construction (the contractor) and Peerless Insurance Company (the surety) appealed the trial court's judgment to the District Court of Appeal of Florida, Second District.
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Issue:
Does a subcontract provision stating that the subcontractor shall receive payment 'within ten working days after contractor receives payment for such from the owner' unambiguously shift the risk of the owner's delayed payment from the general contractor to the subcontractor, thereby creating a condition precedent to payment?
Opinions:
Majority - Danahy, J.
No. A subcontract provision that makes payment to a subcontractor due after the contractor receives payment from the owner is ambiguous and does not shift the risk of owner nonpayment to the subcontractor; rather, it establishes a reasonable time for the contractor to make payment. Relying on Florida Supreme Court precedent in Peacock and DEC Electric, the court reasoned that to shift the risk of owner nonpayment, the contract must contain clear and unambiguous language creating a condition precedent. The burden of clear expression falls on the general contractor. The court's policy recognizes that smaller subcontractors typically do not assume the risk of an owner's failure to pay. The language in this subcontract is comparable to provisions previously found ambiguous by Florida courts and lacks the explicit risk-shifting terms like 'contingent upon payment' or 'condition precedent' that have been held to be unambiguous. Therefore, the provision is ambiguous and only fixes a reasonable time for payment, which the subcontractor conceded was ninety days.
Concurring - Altenbernd, J.
While concurring with the result due to binding precedent, this opinion argues that the payment provision is unambiguous in plain English and should be enforced as written. The clause clearly states payment is due 'after contractor receives payment,' which plainly places the risk of delayed payment on the subcontractor. Established precedent, however, now requires 'magic words' such as 'condition precedent' or 'contingent upon' to enforce such a clause. The judge believes that if such risk-shifting clauses are to be limited, it should be a matter for the legislature, not for courts to achieve by finding ambiguity in otherwise clear contractual language.
Analysis:
This decision solidifies the strong judicial presumption in Florida against 'pay-if-paid' clauses, which shift the risk of owner nonpayment to subcontractors. It reinforces the rule from Peacock that only explicit and unambiguous language, such as 'condition precedent' or 'contingent upon,' can create an enforceable risk-shifting provision. The case serves as a clear warning to general contractors that standard 'pay-when-paid' language will be interpreted as merely a timing mechanism, obligating payment within a reasonable time regardless of payment from the owner. The concurrence highlights the ongoing tension between freedom of contract and judicial policy aimed at protecting financially vulnerable subcontractors.
