Our firm is listed in the Best Directory of Recommended Attorneys for the Baltimore and Washington, D.C., region.

Can a subcontractor stop work if the contractor doesn’t pay them?

On Behalf of | Mar 3, 2023 | Construction Litigation

A construction project is a multi-faceted affair with many parties performing many different types of work all towards the completion of the project. At the heart of all this work are contracts. But what happens if a contract is breached, specifically, if one party refuses to pay for work done?

What is a breach of contract?

A breach of contract takes place when parties enter into an agreement in exchange for consideration, but one party materially fails to live up to their end of the agreement. For example, a contractor may agree to pay a subcontractor in exchange for work completed. Payment arrangements for work completed are expressly stated in the written contract. So, what happens if the subcontractor completes the work, but the contractor refuses to pay?

Failure to pay and breach of contract

A failure to pay is generally considered a material breach. Where there is a material breach, the nonbreaching party need not continue performance of their part of the agreement. Still, whether a specific breach is material is complex and there are few hard-and-fast rules that help judges determine if a breach is material.

If a subcontractor performs work and is not paid per the terms of the contract fairness dictates the subcontractor need not continue working under the terms of the contract. But, per case law, the contractor’s failure to pay per the terms of the contract must be substantial.

It is very risky for a party to walk away from a contract for failure to pay if the failure is not of substantial proportions. If the failure is not substantial, walking away from a contract could be considered a material breach in and of itself.

Breach of contract is generally not as straightforward as it may seem at first blush, even in circumstances where one party refuses to pay per the terms of the agreement. Parties to a construction contract who are not paid what they are owed may want to choose their next steps carefully, as there are risks with simply abandoning the project.