Can our Virginia construction contract make payment down the chain conditional on our being paid?
No. Va. Code § 11-4.6(B)(2) says "Payment by the party contracting with the contractor shall not be a condition precedent to payment to any subcontractor, regardless of that contractor's receiving payment for amounts owed to that contractor, unless the party contracting with the contractor is insolvent or a debtor in bankruptcy as defined in § 50-73.79 . Any provision in a contract contrary to this section shall be unenforceable." The same section writes the clocks into every private construction contract: "In any construction contract between an owner and a general contractor, the parties shall include a provision that requires the owner to pay such general contractor within 60 days of the receipt of an invoice following satisfactory completion of the portion of the work for which the general contractor has invoiced"; if the owner withholds, it must notify the general contractor "within 45 days of the receipt of such invoice, in writing, of his intention to withhold all or part of the general contractor's payment with the reason for nonpayment, specifically identifying the contractual noncompliance and the dollar amount being withheld". Down one tier, the contract "shall require such general contractor to pay such subcontractor within the earlier of (i) 60 days of the receipt of an invoice following satisfactory completion of the portion of the work for which the subcontractor has invoiced or (ii) seven days after receipt of amounts paid by the owner to the general contractor or by the contractor to the subcontractor for work performed by a subcontractor pursuant to the terms of the contract", with a 50-day withholding notice. On a public contract the equivalent clause is mandatory under Va. Code § 2.2-4354(1), which applies to "Any contract awarded by any state agency, or any contract awarded by any agency of local government in accordance with § 2.2-4352" and likewise provides that "Any provision in a construction contract contrary to this section shall be unenforceable", though that subdivision carves out, in its closing sentence, retainage provisions and "contracts awarded solely for professional services as that term is defined in § 2.2-4301 where the public body is contracting directly with an architectural and engineering firm". Three scope limits sit in subsection (A): "Owner" is anyone "other than a public body", "Construction contract" excludes "contracts awarded solely for professional services", and "Contractor" excludes "persons solely furnishing materials". And since July 1, 2026, subsection (C) writes a wage rule into every general contractor-subcontractor contract: the two are "jointly and severally liable to pay the employees of the subcontractor" the greater of the wages due under the employment agreement or under applicable law, the general contractor is "deemed to be the employer of any subcontractor's employees for purposes of § 40.1-29" and bears its criminal and civil penalties, the subcontractor indemnifies the general contractor by default, except where the subcontractor's failure to pay was itself caused by the general contractor's failure to pay moneys due under their contract, and all of it applies only where the general contractor knew or should have known the subcontractor was not paying, the project is not single-family residential, and the project or aggregate exceeds $500,000.
The trap
The interest rate is a cross-reference trap. The much-quoted "one percent per month" figure is in § 2.2-4354(5), which applies to contracts awarded by a state agency or by an agency of local government: an interest rate clause stating, "Unless otherwise provided under the terms of this contract, interest shall accrue at the rate of one percent per month." A PRIVATE contract under § 11-4.6 gets no rate of its own: both subdivisions say only that failure to pay on time "shall result in interest penalties consistent with § 2.2-4355", and that section sets the rate as "the base rate on corporate loans (prime rate) at large United States money center commercial banks as reported daily in the publication entitled The Wall Street Journal", accruing on amounts unpaid after seven days following the payment date, and expressly preserves "any contract providing for a different rate of interest, or for the payment of interest in a different manner". The other trap is the flow-down threshold: the identical payment, notice and interest requirements must appear in every subcontract with a lower-tier subcontractor or supplier of any tier only if the project is "other than a single-family residential project" AND the value of the project, or an aggregate of projects under the contract, is "greater than $500,000". Two more from the text. The § 2.2-4355 interest the private statute borrows carries its own exception: "no interest penalty shall be charged when payment is delayed because of disagreement ... regarding the quantity, quality or time of delivery of goods or services or the accuracy of any invoice", for the disputed portion and the duration of the dispute (§ 2.2-4355(C)), but it is written for a disagreement "between a state agency and a vendor", so on a private contract it reaches the parties only through § 11-4.6's instruction that interest be "consistent with" that section. And the 2026 wage provision in (C) is the one a general contractor's counsel most needs to see: on a non-residential project over $500,000 the general contractor is the statutory employer of every subcontractor's workers for wage-payment purposes, with the default indemnity from the subcontractor as the only contractual relief the section itself supplies.
13 authorities
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
In any construction contract between an owner and a general contractor, the parties shall include a provision that requires the owner to pay such general contractor within 60 days of the receipt of an invoice following satisfactory completion of the portion of the work for which the general contractor has invoiced. An owner shall not be liable for amounts otherwise reducible due to the general contractor's noncompliance with the terms of the contract.
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
However, in the event that an owner withholds all or a part of the amount invoiced by the general contractor under the terms of the contract, the owner shall notify the general contractor within 45 days of the receipt of such invoice, in writing, of his intention to withhold all or part of the general contractor's payment with the reason for nonpayment, specifically identifying the contractual noncompliance and the dollar amount being withheld. Failure of an owner to make timely payment as provided in this subdivision shall result in interest penalties consistent with § 2.2-4355 . Nothing in this subdivision shall be construed to apply to or prohibit the inclusion of any retainage provisions in a construction contract.
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
Such contract shall require such general contractor to pay such subcontractor within the earlier of (i) 60 days of the receipt of an invoice following satisfactory completion of the portion of the work for which the subcontractor has invoiced or (ii) seven days after receipt of amounts paid by the owner to the general contractor or by the contractor to the subcontractor for work performed by a subcontractor pursuant to the terms of the contract. Such contractors shall not be liable for amounts otherwise reducible due to the subcontractor's noncompliance with the terms of the contract. However, in the event that a contractor withholds all or a part of the amount invoiced by any subcontractor under the contract, the contractor shall notify the subcontractor within 50 days of the receipt of such invoice, in writing, of his intention to withhold all or a part of the subcontractor's payment with the reason for nonpayment, specifically identifying the contractual noncompliance, the dollar amount being withheld, and the subcontractor responsible for the contractual noncompliance.
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
Payment by the party contracting with the contractor shall not be a condition precedent to payment to any subcontractor, regardless of that contractor's receiving payment for amounts owed to that contractor, unless the party contracting with the contractor is insolvent or a debtor in bankruptcy as defined in § 50-73.79 . Any provision in a contract contrary to this section shall be unenforceable. Failure of a contractor to make timely payment as provided in this subdivision shall result in interest penalties consistent with § 2.2-4355 . Nothing in this subdivision shall be construed to apply to or prohibit the inclusion of any retainage provisions in a construction contract.
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
Every subcontract between a subcontractor and a lower-tier subcontractor or supplier, of any tier, shall contain the identical payment, notice, and interest requirements as those provided in this subdivision if (i) such construction contract is related to a project other than a single-family residential project and (ii) the value of the project, or an aggregate of projects under such construction contract, is greater than $500,000.
- statuteVa. Code § 2.2-4354enactment date not established
The words that state the rule
Any contract awarded by any state agency, or any contract awarded by any agency of local government in accordance with § 2.2-4352 , shall include: 1. A payment clause that obligates the contractor on a construction contract, in the event that the contractor has not received payment from the state agency or local government for work performed by a subcontractor under such contract, to be liable for the entire amount owed to such subcontractor and to pay such subcontractor within 60 days of the receipt of an invoice following satisfactory completion of the work for which the subcontractor has invoiced. Such contractor shall not be liable for amounts otherwise reducible due to the subcontractor's noncompliance with the terms of the contract. However, in the event that the contractor withholds all or a part of the amount invoiced by the subcontractor under the terms of the contract, the contractor shall notify the subcontractor within 50 days of the receipt of such invoice, in writing, of his intention to withhold all or a part of the subcontractor's payment with the reason for nonpayment, specifically identifying the contractual noncompliance, the dollar amount being withheld, and the lower-tier subcontractor responsible for the contractual noncompliance. Payment by the party contracting with the contractor shall not be a condition precedent to payment to any lower-tier subcontractor, regardless of that contractor's receiving payment for amounts owed to that contractor. Any provision in a construction contract contrary to this section shall be unenforceable. Nothing in this subdivision shall be construed to (i) apply to or prohibit the inclusion of any retainage provisions in a construction contract or (ii) apply to contracts awarded solely for professional services as that term is defined in § 2.2-4301 where the public body is contracting directly with an architectural and engineering firm.
- statuteVa. Code § 2.2-4354enactment date not established
The words that state the rule
An interest rate clause stating, "Unless otherwise provided under the terms of this contract, interest shall accrue at the rate of one percent per month."
- statuteVa. Code § 2.2-4355enactment date not established
The words that state the rule
Interest shall accrue, at the rate determined pursuant to subsection B, on all amounts owed by a state agency to a vendor that remain unpaid after seven days following the payment date. However, nothing in this section shall affect any contract providing for a different rate of interest, or for the payment of interest in a different manner. B. The rate of interest charged a state agency pursuant to subsection A shall be the base rate on corporate loans (prime rate) at large United States money center commercial banks as reported daily in the publication entitled The Wall Street Journal. Whenever a split prime rate is published, the lower of the two rates shall be used. However, in no event shall the rate of interest charged exceed the rate of interest established pursuant to § 58.1-1812 .
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
"Construction contract" means a contract for the construction, alteration, repair, or maintenance of a building, structure, or appurtenance thereto, including moving, demolition, and excavation connected therewith, or any provision contained in any contract relating to the construction of projects other than buildings, except for contracts awarded solely for professional services as that term is defined in § 2.2-4301 . "Contractor" or "general contractor" means the same as that term is defined in § 54.1-1100 , except that such term shall not include persons solely furnishing materials. "Owner" means a person or entity, other than a public body as defined in § 2.2-4301 , responsible for contracting with a general contractor for the procurement of a construction contract. "Subcontractor" means the same as that term is defined in § 2.2-4347 .
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
C. 1. Any construction contract between a general contractor and its subcontractor entered into on or after July 1, 2026, shall be deemed to include a provision under which the general contractor and its subcontractor are jointly and severally liable to pay the employees of the subcontractor the greater of (i) all wages due to the subcontractor's employees at such rate and upon such terms as shall be provided in the employment agreement between the subcontractor and its employees or (ii) the amount of wages that the subcontractor is required to pay to its employees under the provisions of applicable law, including the provisions of §§ 40.1-28.7:7 and 40.1-29 , the Virginia Minimum Wage Act (§ 40.1-28.8 et seq.), and the federal Fair Labor Standards Act (29 U.S.C. § 201 et seq.). 2. A general contractor shall be deemed to be the employer of any subcontractor's employees for purposes of § 40.1-29 . If the wages due to the subcontractor's employees under the terms of the employment agreement between a subcontractor and its employees are not paid, the general contractor shall be subject to all penalties, criminal and civil, to which an employer that fails or refuses to pay wages is subject under § 40.1-29 . Any liability of a general contractor pursuant to § 40.1-29 shall be joint and several with the subcontractor that failed or refused to pay the wages to its employees. 3. Except as otherwise provided in a contract between the general contractor and the subcontractor, the subcontractor shall indemnify the general contractor for any wages, damages, interest, penalties, or attorney fees owed as a result of the subcontractor's failure to pay wages to the subcontractor's employees as provided in subdivision 1, unless the subcontractor's failure to pay the wages was due to the general contractor's failure to pay moneys due to the subcontractor in accordance with the terms of their construction contract.
- statuteVa. Code § 11-4.6enactment date not established
The words that state the rule
4. The provisions of this subsection shall only apply if (i) it can be demonstrated that the general contractor knew or should have known, as defined by the Commissioner of Labor and Industry, that the subcontractor was not paying his employees all wages due, (ii) the construction contract is related to a project other than a single family residential project, and (iii) the value of the project, or an aggregate of projects under one construction contract, is greater than $500,000.
- statuteVa. Code § 2.2-4355enactment date not established
The words that state the rule
C. Notwithstanding subsection A, no interest penalty shall be charged when payment is delayed because of disagreement between a state agency and a vendor regarding the quantity, quality or time of delivery of goods or services or the accuracy of any invoice received for the goods or services. The exception from the interest penalty provided by this subsection shall apply only to that portion of a delayed payment that is actually the subject of the disagreement and shall apply only for the duration of the disagreement.
- statuteVa. Code § 2.2-4355enactment date not established
The words that state the rule
D. This section shall not apply to § 2.2-4333 pertaining to retainage on construction contracts, during the period of time prior to the date the final payment is due. Nothing contained herein shall prevent a contractor from receiving interest on such funds under an approved escrow agreement.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.