Magazine article Business Credit
Lien Law Update: ASA and ASA of Arizona Say Arizona Courts Must Follow Ban of Pay-If-Paid
The American Subcontractors Association (ASA) and its state chapter in Arizona, ASA of Arizona (ASAAZ), are defending the rights established by the Arizona Legislature for construction subcontractors to be paid promptly and in full for work they properly perform. On March 24, ASA and ASAAZ filed an amicus curiae, or "friend of the court," brief in the appeal of ISEC Inc. vs. Diamond Building Group et al., arguing that a trial court failed to properly take into account Arizona's ban on pay-if-paid clauses in construction contracts.
The original case concerns a surety bond company's refusal to honor a subcontractor's claim for payment after the owner terminated the general contractor and the general contractor did not pay the subcontractor for its work. A trial court ruled in favor of the surety company and the general contractor, but failed to take into account Arizona law barring pay-if-paid terms and restricting payment sureties' use of such terms to deny claims, ASA and ASAAZ argue in the brief. ASA and ASAAZ are urging an Arizona Court of Appeals to reject the trial court's decision. ASA tapped its Subcontractors Legal Defense Fund (SLDF) to file a motion for ASA and ASAAZ to intervene on behalf of subcontractors, and to file the amicus brief.
"Subcontractors have toiled to protect their rights with pay-if-paid bans in states such as Arizona," said 2003-04 ASA President Rick Wanner, executive vice president, Wanner Metal Worx Inc., Delaware, Ohio."Payif-paid clauses are inherently flawed, making it especially wrong for courts to ignore the will and intent of legislators who have recognized by statute that such clauses are unacceptable in the business of construction. …