we were a gc in new mexico
one of our subs did not pay some supply vendors
can i pay the supply vendors direct then go after the sub
We usually do joint checks but the sub is not cooperating and wants the supplier to lien the property
1 reply
Jan 27, 2020
It isn't the normal course of business by any means, but it's also not unheard of to hear that a contractor might pay their sub's vendor to avoid payment disputes on the job. Often, this will come in the way of a contractor leapfrogging their sub to pay a vendor directly, then withholding payment from the subcontractor. And, in that situation, a contractor can usually avoid a more serious dispute by ensuring everyone is ultimately paid what they would have taken from the job anyway.
Where a subcontractor has been paid in full but refuses to pay their vendors - things become a little less clear. First, it'd be important to look to the contract. If the contract provides a specific remedy that'd help in the situation, then that remedy should probably be followed. But, if the contract doesn't provide any help - then paying a vendor directly to avoid facing a mechanics lien or other payment dispute makes sense.
If a contractor must pay their sub's vendors directly, then the contractor will generally have legal claims available against their sub to help recover payment. After all, if the sub is paid in full but then no longer has to pay their vendor, that's a huge windfall at the expense of the contractor. Typically, some right of action - like breach of contract, unjust enrichment, or even potentially conversion or theft claims could be available against a subcontractor who refuses to pay vendors. Almost certainly, some cause of action against a subcontractor would be on the table for making their GC whole.
For the most clarity on what claims would be available to you, though, it'd be wise to consult with a local construction attorney. They'll be able to review the relevant circumstances and project documentation, then advise on what options will be on the table going forward.