Bovis Strikes Back - Nevada Supreme Court Takes Mulligan On Pay-if-Paid

In June, the Nevada Supreme Court released its opinion in Bovis v. Bullock, 124 Nev. Adv. Op. 39, 185 P.3d 1055 (June 2008).  See this blog post on the case for details of the facts.  In the Court's June opinion, it held that pay-if-pay provisions in subcontract agreements violate Nevada public policy.  Although the subcontract at issue was entered into before the 2001 amendments to NRS Chapter 624, the Court declared in Footnote 33 that the prompt payment sections included in the 2001 amendments render pay-if-paid provisions unenforceable for contracts entered into after the amendments.

Now, the Supreme Cout has withdrawan its June opinion and replaced it with Bovis v. Bullock, 124 Nev. Adv. Op. 92 (Oct. 30, 2008).  The new opinion changes nothing with respect to pay-if-paid provisions entered into before the 2001 amendments.  The Court stuck with its previous conclusion "that pay-if-paid provisions are unenforceable because they violate public policy."  The notable difference in this new opinion, however, is in Footnote 50.  There, the Court states, "Pay-if-paid provisions entered into subsequent to the Legislature's amendments are enforceable only in limited circumstances and are subject to the restrictions laid out in these sections.  2001 Nev. Stat., ch. 341, §§ 5-6, at 1615-18."  (emphasis added).

The statutes the Court refers to are NRS 624.624 and NRS 624.626.  NRS 624.624 governs payment by higher-tiered contractors to lower-tiered subcontractors.  If there is a written agreement that includes a schedule of payments, the statute requires payment on the due date or within 10 days of receiveing payment for the work, whichever is earlier.  If there is no payment schedule, it reqires payment within 30 days after the lower-tiered subcontractor submits a request for payment or within 10 days of receiving payment for the work, whichever is earlier.  NRS 624.626 provides lower-tiered subcontractors with the ability to stop work if they have not received payment as required and they meet certain notice prerequisites.

Where does this leave us?  It leaves us with the following unanswered question: what are the "limited circumstances" in which pay-if-paid provisions entered into subsequent to the 2001 amendments are enforceable?  The open question is the benefit of this opinion over the withdrawan Bovis opinion.  In the former opinion, the Court conclusively said that pay-if-paid provisions entered into after the 2001 amendments were unenforceable.  Period.  But that issue was not before the Court in the case because the provision in question was entered into before the amendments to the statutes.  With this new opinion, the Court allows itself the ability to address the question head on when it is duly raised.  It is anyone's guess how the Court will interpret NRS 624.624 and 624.626, but at least the question is open, to be answered on an appropriate set of facts.