A recent case out of Georgia highlights the importance for subcontractors to follow the contract terms when submitting a payment. In SCI, Inc. v. Engineered Concepts, Inc., a subcontractor sought additional compensation of $300,000.00. The upstream contractor agreed that the $300,000.00 was owed, but refused to disburse that amount to the subcontractor, claiming that the subcontractor failed to satisfy the contractual terms for requesting payment.
Not surprisingly, the case went to court. The upstream contractor argued that the subcontractor failed to follow the steps set forth in the contract. The subcontractor argued that the language in the contract was not clear and the subcontractor did not have to follow it because the upstream contractor had agreed about the amount owed.
Apparently, the contract required the subcontractor to submit final waivers and releases before payment had to be made. And, for whatever reason, the subcontractor failed to submit these final waivers and releases. The court ruled that the upstream contractor was not required to pay the subcontractor until the subcontractor complied with the terms of the contract.
This case certainly makes clear the importance of complying with the contract terms when submitting a pay application. But, it’s not clear why SCI did not submit final waivers and the required affidavits. As with most cases, something must have been going on that did not make it to the forefront of the court’s opinion. Nevertheless, the oft repeated tenet “know thy contract” is again supported by this case.