## Facts

- Louisiana World Exposition, Inc. (LWE) owned construction projects for the 1984 Louisiana World’s Fair and contracted with general contractors, including J.A. Jones Construction Company (Jones).
- Jones subcontracted concrete masonry work to Southern States Masonry, Inc. (Southern) for multiple World’s Fair structures; Southern had no direct contract with LWE.
- LWE paid Jones only through a portion of the work and later filed for Chapter 11 bankruptcy, leaving Jones unpaid for part of the prime contract price.
- Southern performed work and sought remaining payment from Jones and Jones’s surety, Fidelity and Deposit Company of Maryland.
- The subcontract included “pay-when-paid” language stating Southern would be paid after Jones received payment from LWE.
- Lower courts interpreted the payment language as making LWE’s payment to Jones a suspensive condition to Jones’s obligation to pay Southern, effectively relieving Jones of further payment due to LWE’s nonpayment.

## Issues

1. Whether subcontract “pay-when-paid” clauses make owner payment to the general contractor a suspensive condition to the contractor’s duty to pay a subcontractor.
2. If not a suspensive condition, whether such clauses merely delay the due date for payment and, if so, for how long when the owner never pays.

## Decision

- The Louisiana Supreme Court reversed the court of appeal judgment that favored Jones.
- The court held the “pay-when-paid” provisions were not suspensive conditions.
- The clauses were construed as terms for payment that only delay the contractor’s obligation to pay, and only for a reasonable period of time.
- The matter was remanded for further proceedings consistent with the court’s interpretation, leaving Jones obligated to pay Southern despite LWE’s bankruptcy and nonpayment.

## Legal Principles

- Under Louisiana law, a suspensive condition is an uncertain event on which the existence of an obligation depends; if it does not occur, the obligation never arises.
- A contractual term may instead regulate only the time for performance of an existing obligation, postponing payment without extinguishing the duty.
- “Pay-when-paid” language, without clear and unequivocal risk-shifting language, is generally interpreted as fixing the time payment becomes due rather than conditioning whether payment is owed.
- Such timing provisions may delay payment to allow the contractor a reasonable opportunity to obtain owner payment, but do not permit indefinite nonpayment if the owner defaults.

## Conclusion

The court ruled that standard “pay-when-paid” clauses do not transfer the risk of owner insolvency to subcontractors as a suspensive condition; they merely postpone payment for a reasonable time, after which the general contractor remains liable to pay for satisfactory subcontract performance.


S. States Masonry, Inc. v. J.A. Jones Constr. Co., 507 So. 2d 198 (La. 1987)