Subcontract Term Takes Precedence Over Prompt Pay Provision of Pennsylvania Commonwealth Procurement Code Less Favorable to Subcontractor

American Rock Mechanics, Inc. v. N. Abbonizio Contractors, Inc. and Fidelity and Deposit Company of
2005 PA Super 390; 2005 Pa. Super. LEXIS 4086 (Pa. Super. Ct. 2005)

In American Rock Mechanics, Inc. v. N. Abbonizio Contractors, Inc. and Fidelity and Deposit Company of Maryland, 2005 Pa. Super. 390, (Pa. Super. Ct. 2005), the Court held that the terms of the parties’ subcontract concerning time for payment took precedence over the those set forth in the Commonwealth Procurement Code, 62 Pa.C.S. § 3933.

Plaintiff, American Rock Mechanics, Inc. (“AMROC”) entered into a subcontract with Defendant, N. Abbonizio Contractors, Inc. (“Abbonizio”), for drilling and earth removal services on a sanitary sewer project (the “Subcontract”). The Subcontract required Abbonizio to make weekly payments during the life of the project and pay all remaining amounts within thirty days of the project’s completion. When Abbonizio failed to make the payments required under the Subcontract, AMROC commenced an action for payment in the Court of Common Pleas of Montgomery County.

For its defense, Abbonizio argued that the “pay-when-paid” terms of the Commonwealth’s Procurement, not the payment terms of the Subcontract, controlled Abbonizio’s payment obligations. Accordingly, Abbonizio contended that AMROC’s claims were barred by failure of the owner to remit payment to Abbonizio. Upon AMROC’s motion, the trial court granted judgment on the pleadings in favor of AMROC.

On appeal, among other issues, the Superior Court reviewed whether Abbonizio’s payment obligations to AMROC were controlled by the “pay-when-paid” terms of the Commonwealth Procurement Code, or whether the payment terms of the Subcontract controlled. The Superior Court held that the parties’ Subcontract controlled Abbonizio’s obligation to make payment.

Specifically, the Court determined that the legislature did not intend to defeat the terms negotiated between a contractor and subcontractor. Moreover, the legislature did not intend to condition subcontractors’ receipt of payment upon the contractor’s own receipt of payment from the responsible government agency. The legislature merely intended to insure that no contractor can wrongly withhold payment from a subcontractor for work completed in accordance with the parties’ contract.