How might proposed legislation impact you or your business? Below, our attorneys share their analysis of House Bill 451 – and what it could mean for you.
In the construction contracting world, there is an age old concept known as “pay-if-paid.” This contractual language creates a condition precedent of one party, typically the General Contractor, to the make payment to another, typically a Subcontractor. If the condition is not satisfied, no performance (i.e. payment) is owed. Essentially, every General Contractor wishes to only be obligated to pay a Subcontractor AFTER they have received payment for the Subcontractors’ work from the Owner. You can understand why: it is the Owner’s project, not the General Contractor’s. The General Contractor does not want to finance the Owner’s project, and they really should not have to.
For years, the “pay if paid” clause has been enforced. Recently, a significant groundswell movement has occurred in various states attacking the “pay if paid” clause and seeking to eliminate it. Virginia did just that a year ago. Other states have also reached the same outcome.
A bill has again been introduced in this year’s General Assembly session (it was also introduced in Maryland last year) seeking to similarly eliminate the “pay if paid” clause from construction contracts in Maryland – for both public and private projects. House Bill 451 (https://mgaleg.maryland.gov/2025RS/bills/hb/hb0451F.pdf) was introduced on January 16 and is currently working its way through the legislative process. This bill would eliminate the “pay if paid” condition precedent clause from construction contracts, and would require a General Contractor to make payment to a Subcontractor either within 60 days of the date of the Subcontractor’s invoice or within 7 days after the General Contractor received payment from the Owner for the Subcontractor’s work.
We cannot predict what the General Assembly will do with the bill and whether Maryland will join Virginia in the ever-growing list of jurisdictions that have eliminated “pay-if-paid,” but we can say that one of the classic hallmarks and foundational concepts of construction contracts is very much under close scrutiny.
For more information about how this proposed legislation may impact your business, contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or contact an attorney in our Construction Litigation Practice Group.
