Mastec and Hylan entered into a subcontract in May of 2000 which Hylan was to install fiber optic wiring on a private project. The work was to be performed in New York, but the parties agreed that the contract would be governed by Florida law.

The subcontract contained a “pay-if-paid” provision which is prohibited in NY in violation of Lien Law Sec. 34 (see: West-Fair Elec. Contr. v. Aetna C&S). However, pay-if-paid provisions are permissible in Florida, and NY courts will enforce that provision in a contract which is governed by Florida law (see: Welsbach Elec. v. Mastec).

That would not be the case, however, if the contract was entered into after January 13, 2003, and was part of a project costing a total of $250,000 or more. In that event, General Business Law Sec. 757(1), as part of the new Private Prompt Pay Law, declares that the choice of law provision in the Hyland subcontract would have been null and void.

Gen Bus L Sec. 757 states in relevant part: “The following provisions of construction contracts shall be void and unenforceable:

1. A provision …in, collateral to or affecting a construction contract, with the exception of a contract with a material supplier, that makes the contract subject to the laws of another state or that requires any litigation, arbitration or other dispute resolution proceeding arising from the contract to be conducted in another state.”

This change in the law came too late to benefit Hyland, and it could only be paid what ever Mastec had received from the owner.