Title: Young Electrical Contractors, Inc. v. Dustin Construction, Inc.

State: maryland

Issuer: Maryland Supreme Court

Document:

Young Electrical Contractors, Inc. v. Dustin Construction, Inc. 
No.  8, September Term 2017 
 
 
Contracts – Interpretation – Construction Contracts – Conditional Payment 
Provisions.  A contract between a general contractor and a subcontractor on a construction 
project may typically contain a provision that relates the payments to be made by the 
general contractor to the subcontractor to the payments to be made by the project owner to 
the general contractor.  In some instances, such provisions are interpreted to govern only 
the timing of the general contractor’s payments to the subcontractor and not the obligation 
of the general contractor to pay the subcontractor.  Such provisions are sometimes referred 
to as pay-when-paid clauses.  Other provisions include language making the owner’s 
payment of general contractor a condition precedent for the general contractor’s obligation 
to pay the subcontractor and shift the risk of the owner’s non-payment from the general 
contractor to the subcontractor.  They are sometimes called pay-if-paid clauses. 
 
Civil Procedure – Summary Judgment.  In a breach of contract case in a Maryland circuit 
court concerning a construction contract governed by Virginia law, the trial court erred as 
a matter of law in awarding summary judgment in favor of a general contractor against a 
subcontractor based upon a pay-if-paid clause in the subcontract because that clause did 
not necessarily apply to the damages sought in the action.  Applying Maryland procedural 
law, the Court of Appeals declined to affirm the award of summary judgment on alternative 
grounds, as the trial court would not have been required to award summary judgment on 
the alternative grounds. 
 
 
 
 
 
Circuit Court for Montgomery County 
Case No. 381002V 
Argument:  October 6, 2017 
IN THE COURT OF APPEALS 
OF MARYLAND 
 
No. 8  
 
September Term, 2017 
 
 
 
YOUNG ELECTRICAL CONTRACTORS, INC. 
 
V. 
 
DUSTIN CONSTRUCTION, INC. 
_____________________________________ 
 
 
 
 
Barbera, C.J., 
 
 
 
Greene 
 
 
 
Adkins 
 
 
 
McDonald 
 
 
 
Watts 
 
 
 
Hotten 
 
 
 
Getty, 
 
 
 
 
 
JJ. 
______________________________________ 
 
Opinion by McDonald, J. 
______________________________________ 
 
Filed: May 24, 2018   
 
In a typical scenario in the construction industry, the owner of a construction project 
enters into a prime contract with a general contractor to erect or renovate a building.  The 
general contractor then enters into subcontracts with suppliers and trade contractors, such 
as plumbers and electricians, to provide materials or to perform portions of the work.  For 
various reasons, the owner of the project may later be unable or unwilling to pay the general 
contractor under the prime contract.  What this means for the subcontractor depends on the 
terms of its subcontract with the general contractor.   
A subcontract may contain a provision that relates payment of the subcontractor by 
the general contractor to the payment of the general contractor by the project owner.  Some 
provisions, sometimes called pay-when-paid clauses, concern the timing of payment by the 
general contractor, but do not relieve the general contractor of its liability to the 
subcontractor under the subcontract.  Other provisions, sometimes called pay-if-paid 
clauses, make the project owner’s payment of the general contractor a condition precedent 
of the general contractor’s obligation to pay the subcontractor and thus can relieve the 
general contractor of liability to the subcontractor, even though the subcontractor has fully 
performed its part of the subcontract. 
This case concerns the propriety of an award of summary judgment in favor of a 
general contractor against a subcontractor based on a pay-if-paid clause.  The 
subcontractor, Petitioner Young Electrical Contractors, Inc., sued the general contractor, 
Respondent Dustin Construction, Inc., in the Circuit Court for Montgomery County for 
breach of contract relating to a construction project in Virginia.  Applying Virginia law, 
the Circuit Court held that a pay-if-paid provision in the subcontract applied to the damages 
2 
 
sought in the action, determined that there was no dispute that the owner of the project had 
not paid the general contractor with respect to the matters in issue, and awarded summary 
judgment in favor of the general contractor.  The Court of Special Appeals affirmed that 
decision, although for slightly different reasons. 
We hold that the pay-if-paid clause relied upon by the Circuit Court, which was 
cited by neither party in motion papers or argument concerning summary judgment, does 
not necessarily apply to the issues in this case.  Moreover, consistent with Maryland law 
concerning review of awards of summary judgment, we decline to seek other reasons to 
affirm the Circuit Court’s decision.  Accordingly, we vacate the judgment of the Court of 
Special Appeals and remand the matter to the Circuit Court for further factual development. 
I 
Background  
A. 
 “Pay - When - Paid” and “Pay - If - Paid” Clauses 
  
 
In a typical construction project, the owner of the project contracts with a general 
contractor to carry out the project.  The general contractor then enters into contracts with 
various suppliers and trades – the subcontractors – to provide the materials and carry out 
the actual construction.  There is no necessary linkage between a subcontractor’s or 
supplier’s entitlement to compensation for performing a subcontract and the owner’s 
performance of its obligations – primarily payment of the general contractor – under the 
prime contract.  Thus, in the absence of an agreement to the contrary, a subcontractor that 
has completed its work is entitled to be paid regardless of whether the general contractor 
3 
 
has been paid by the project owner.  See J. Acret & A.D. Perrochet, Construction Litigation 
Handbook 3rd, §4.4.  
During the latter half of the twentieth century, general contractors began to include 
contingent payment provisions in their subcontracts.  Although there apparently was no 
standard language, such a clause would typically provide that the general contractor was 
not obligated to pay the subcontractor until some specified number of days after the general 
contractor received payment under the prime contract from the owner of the project.  Thus, 
for example, a window distributor that entered into a subcontract to supply windows for a 
project would not necessarily receive payment upon delivery of the windows, but would 
be required to await payment of the general contractor by the owner of the project. 
Such clauses could be viewed as creating two different types of conditions.  One 
interpretation of such a clause would view it simply as a timing provision – i.e., it permits 
the general contractor to delay payment of the subcontractor until after it receives payment 
from the owner or (if that does not occur) some other period deemed reasonable, but does 
not relieve the general contractor of its obligation to compensate the subcontractor for its 
work.  This interpretation might be viewed as a subcontractor-friendly version of the 
clause, as it considers the provision to govern when, but not whether, the subcontractor is 
to be paid by the general contractor.   
Another interpretation of such a clause would view it as a condition precedent for 
payment of the subcontractor – i.e., if the general contractor is not paid by the project owner 
under the prime contract, then the general contractor is not obligated to pay the 
subcontractor under the subcontract.  In such a view, the subcontractor has not only agreed 
4 
 
to provide materials or to perform work on the project, but is also providing the general 
contractor with a sort of insurance against the risk of non-payment by the owner – a risk 
usually associated with insolvency or bankruptcy of the owner.  This might be viewed as a 
general contractor-friendly version of the clause. 
Although the nomenclature used in the case law and legal literature has not been 
consistent, for purposes of this opinion we shall distinguish between these two types of 
clauses by adopting the terminology used in a number of recent cases.1  We shall refer to a 
provision that creates a timing condition as a “pay-when-paid” clause.  We shall refer to a 
provision that creates a condition precedent for the obligation to pay as a “pay-if-paid” 
clause.”  As is often the case, when there is a dispute as to whether a particular contract 
provision falls into one category or the other, the devil is in the details.   
This case will require us to apply the law of Virginia to construe a subcontract and 
prime contract.  To put that law in perspective, we review briefly the evolution of judicial 
treatment of such clauses. 
The Majority Approach 
Under what has frequently been described as the majority approach,2 a court will 
construe such a clause narrowly and interpret it to be a payment timing provision – i.e., a 
                                              
1 See, e.g., Sloan & Co. v. Liberty Mutual Ins. Co., 653 F.3d 175, 180 (3d Cir. 2011); 
Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., 16 N.E.3d 645, 648-49 (Ohio 2014); 
Lemoine Co. of Alabama v. HLH Constructors, Inc., 62 So.3d 1020, 1027 (Ala. 2010); see 
also R.F. Carney & A. Cizek, Payment Provisions in Construction Contracts and 
Construction Trust Fund Statutes:  A Fifty-State Survey, 24 Construc. Law. 5 (Fall 2004). 
2 See, e.g., Galloway Corp. v. S.B. Ballard Const. Co. 464 S.E.2d 349, 354 (Va. 
1995); see also M. Alsbrook, Contracting Away an Honest Day’s Pay:  An Examination of 
5 
 
pay-when-paid clause – unless the language of the provision clearly and necessarily creates 
a risk-shifting provision – i.e., a pay-if-paid clause.   
The leading case is Thos. J. Dyer Co. v. Bishop International Engineering Co., 303 
F.2d 655 (6th Cir. 1962).  In that case, a general contractor entered into a subcontract with 
a plumbing subcontractor to install plumbing for a construction project at a race track.  The 
plumbing subcontractor provided the services required by the subcontract, but there were 
cost overruns due to additional work requested by the owner and general contractor, some 
of which was outside the scope of the prime contract.  When the plumbing subcontractor 
sought payment for the additional work, the general contractor declined because it had not 
been paid by the owner, which had become insolvent and filed for bankruptcy.  The general 
contractor relied on language in the subcontract stating “no part of [payment] shall be due 
until five (5) days after Owner shall have paid Contractor[.]”   
The Sixth Circuit observed that the “crucial issue” in the case was “whether … [the 
contract provision] … is to be construed as a conditional promise to pay, enforceable only 
when and if the condition precedent has taken place [i.e., a pay-if-paid provision] … or … 
is to be construed as an unconditional promise to pay with the time of payment being 
postponed until the happening of a certain event, or for a reasonable period of time if it 
develops that such an event does not take place [i.e., a pay-when-paid provision].”  303 
F.2d at 659.   
                                              
Conditional Payment Clauses in Construction Contracts, 58 Ark. L.Rev. 353, 354, 370-72 
(2005); W.M. Hill & D.M. Evans, Pay When Paid Provisions:  Still a Conundrum, 18 
Construc. Law. 16 (April 1998). 
6 
 
While the Dyer court conceded that the expressed intention of the parties ultimately 
governed the interpretation of a particular provision, it observed that courts had generally 
viewed such clauses as timing, rather than risk-shifting, provisions unless the contract 
language clearly indicated otherwise.  After reviewing case law in Ohio and Kentucky 
concerning conditional payment clauses, the court concluded that “[t]he tendency of the 
courts is to hold that, unless the contract shows clearly that such an action is an express 
condition, the provision with reference to such act is inserted in order to fix the time of 
performance, but not to make the doing of such act or the happening of such event a 
condition precedent.  If this is the intention of the parties, the fact that such act is not 
performed or that such event does not happen, does not discharge the contract, and the act 
which the parties agree to do upon the performance of such act or upon the happening of 
such event, is to be performed in at least a reasonable time.”  303 F.2d at 660 (internal 
citations and quotations omitted).   
The Dyer court rooted its analysis in its understanding of risk-sharing in the 
construction industry.  The court considered it “basic in the construction business” for the 
general contractor to expect to be paid in full because it is “a fundamental concept of doing 
business[.]”  303 F.2d at 660.  Although the “solvency of the owner is a credit risk 
necessarily incurred by the general contractor,” various mechanisms such as installment 
payments and liens are designed to keep those risks to a minimum.  The court went on to 
explain that these issues are “even more pronounced in the case of a subcontractor, whose 
contract is with the general contractor, not with the owner.”  Id.  The court observed that, 
while a subcontractor might be dependent on the solvency of the general contractor, 
7 
 
normally the insolvency of the owner would not defeat the subcontractor’s claim against 
the general contractor.  Thus, “in order to transfer this normal credit risk [related to the 
owner] ... from the general contractor to the subcontractor, the [subcontract] should contain 
an express condition clearly showing that to be the intention of the parties.”  Id. at 660-61.   
In the case before it, the Sixth Circuit ultimately concluded that the language of the 
subcontract did not indicate that the plumbing subcontractor intended to bear the burden of 
the owner’s insolvency and, accordingly, the appellate court affirmed the trial court’s 
judgment in favor of the plumbing subcontractor.  Id. at 661.  (“To construe [the provision] 
as requiring the subcontractor to wait to be paid for an indefinite period of time until the 
general contractor has been paid by the owner, which may never occur, is to give to it an 
unreasonable construction which the parties did not intend at the time the subcontract was 
entered into.”). 
The majority approach appears to be based, at least in part, on a general principle 
that disfavors construing a contract provision to effect a forfeiture, particularly when the 
condition precedent is outside the control of the party at risk of forfeiture.  See Restatement 
(Second) of Contracts, §227(1) (March 2018 update) (“In resolving doubts as to whether 
an event is made a condition of an obligor’s duty … an interpretation is preferred that will 
reduce the obligee’s risk of forfeiture, unless the event is within the obligee’s control or 
the circumstances indicate that he has assumed the risk”).  In the context of a subcontract 
for a construction project, this principle favors construing a conditional payment provision 
as a timing provision rather than a risk-shifting provision.  Id., illustration 1 (describing 
example apparently based on Dyer case). 
8 
 
Pay-if-Paid Clause as against Public Policy 
In some jurisdictions there is more than a preference for construing conditional 
payment clauses as timing provisions.  In those jurisdictions, there is a view that the transfer 
of risk effected by a pay-if-paid clause in a construction subcontract is contrary to public 
policy.  At least two state courts have held that such a clause, even if explicitly set out in a 
subcontract, is void as against public policy.  See West-Fair Elec. Contractors v. Aetna 
Cas. & Sur. Co., 661 N.E.2d 967, 970 (N.Y. 1995) (holding that pay-if-paid clause was 
inconsistent with state legislature’s enactment of mechanic’s lien statute to protect “those 
who furnish work, labor and services or provide materials for the improvement of real 
property”); William R. Clarke v. Safeco Ins. Co., 938 P.2d 372, 373-74 (Cal. 1997) (citing 
West-Fair and stating similar rationale); but see Superior Steel, Inc. v. Ascent at Roebling’s 
Bridge, LLC, 540 S.W.3d 770, 785-87 (Ky. 2018) (declining to adopt public policy 
rationale in light of state’s long tradition of freedom of contract).  In addition, the 
legislatures in several states have enacted statutes declaring such clauses to be void.  See 
R.F. Carney & A. Cizek, Payment Provisions in Construction Contracts and Construction 
Trust Fund Statutes:  A Fifty-State Survey, 24 Construc. Law. 5 (Fall 2004); M. Alsbrook, 
Contracting Away an Honest Day’s Pay:  An Examination of Conditional Payment Clauses 
in Construction Contracts, 58 Ark. L.Rev. 353, 379-83 (2005). 
Maryland Case Law 
Although the contract in this case is not governed by Maryland law, the Virginia 
Supreme Court has referenced Maryland law in its own analysis of conditional payment 
9 
 
clauses.  In order to fully understand Virginia law, it is useful to review the Maryland 
decisions on which it is partly based. 
This Court has relied upon, and quoted at length from, the Dyer decision in resolving 
a payment dispute between general contractor and a subcontractor when a project owner 
has not fully paid the general contractor.  See Atl. States Const. Co. v. Drummond & Co., 
251 Md. 77, 81-84 (1968); Fishman Constr. Co. v. Hansen, 238 Md. 418, 422-23 (1965).  
Consistent with Dyer, this Court has stated that such provisions are to be construed as 
timing provisions – pay-when-paid clauses – unless the contract language clearly indicates 
that the parties intended otherwise. 
In a decision later relied upon by the Virginia Supreme Court, the Court of Special 
Appeals considered what language would suffice to shift the risk of owner insolvency from 
the general contractor to the subcontractor.  Gilbane Bldg. Co. v. Brisk Waterproofing Co., 
86 Md. App. 21 (1991).  In that case, a masonry subcontractor had completed all of the 
work required under its subcontract on a residential condominium project.  The general 
contractor refused to make the final payment that was due to the subcontractor because the 
general contractor had not received a payment from the project owner.  After the masonry 
subcontractor’s mechanic’s lien on the property had been extinguished as a result of the 
project owner’s bankruptcy, the masonry subcontractor sued the general contractor for 
payment.   
In declining to pay the masonry subcontractor, the general contractor had relied on 
a subcontract provision which stated, in pertinent part, that “[i]t is specifically understood 
and agreed that the payment to the trade contractor is dependent, as a condition precedent, 
10 
 
upon the construction manager receiving contract payments, including retainer from the 
owner.”  86 Md. App. at 25 (emphasis added in original).  The Court of Special Appeals 
concluded that the reference in the subcontract to owner payment as a “condition 
precedent” was sufficient to shift the risk of owner insolvency to the masonry subcontractor 
as a matter of objective contract interpretation, regardless of whether the parties had 
actually discussed the risk of owner insolvency during their negotiations.  Id. at 28.   
Virginia Case Law 
In 1995, the Virginia Supreme Court addressed for the first time the distinction 
between pay-when-paid and pay-if-paid clauses and whether a particular subcontract 
provision shifted the risk of owner default from the general contractor to the 
subcontractors.  Galloway Corp. v. S.B. Ballard Const. Co., 464 S.E.2d 349 (Va. 1995).  
That case arose from the construction of a commercial office complex in downtown 
Norfolk, Virginia.  The general contractor had entered into various subcontracts with 
suppliers of labor and materials, all of which contained a provision stating that “[t]he 
Contractor shall pay the Subcontractor each progress payment within three working days 
after the Contractor receives payment from the Owner.”  464 S.E.2d at 352 (emphasis 
added in original).  Each subcontract contained similar language with respect to the final 
payment due to each subcontractor.  Id. 
Work had progressed on the project for nearly two years, when the project owner 
encountered financial difficulties in the midst of construction.  After the owner failed to 
make three progress payments to the general contractor, construction stopped and lawsuits 
began.  464 S.E.2d at 352.  The subcontractors recovered some of the compensation due 
11 
 
them through the satisfaction of mechanic’s liens on the project, and sought to recover the 
remainder through a breach of contract action against the general contractor.  The general 
contractor relied on the payment clause to defend itself from the subcontractors, arguing 
that it was not liable to the subcontractors because it had not been paid by the owner.  Id. 
at 353.  The trial court ruled in favor of the subcontractors, concluding that the payment 
clause in the subcontracts concerned the timing of payment and did not relieve the general 
contractor of its liability to the subcontractors.   
On appeal, the Virginia Supreme Court came to a more nuanced conclusion.  It 
discussed the Dyer case at some length and opined that the Sixth Circuit decision was 
“sound and in concert with traditional notions of the freedom to contract.”  464 S.E.2d at 
354.  It regarded the Dyer case as dealing with contract language that, on its face, 
reasonably contemplated eventual payment of the subcontractor.  The Virginia court 
contrasted the contract language in Dyer with that in Court of Special Appeals’ Gilbane 
decision, which it regarded as an equally clear example of an instance in which the parties 
intended to establish a condition precedent to the general contractor’s liability.  Id. 
In the case before it, however, the Virginia Supreme Court concluded that the 
contract language was not as clear as in either Dyer or Gilbane.  The Court said “there is 
no additional language here which would permit us to find that the parties contemplated 
payment ‘within a reasonable time[,]’” as it understood the provision in Dyer.  Unlike 
Gilbane, “nothing in the contracts would permit us to find ... that the parties clearly 
understood these terms to assert a condition precedent on payment.”  464 S.E.2d at 355.  
As a result, the Virginia Supreme Court concluded that “the phrases ‘after the Contractor 
12 
 
receives payment from the Owner’ and ‘has received payment from the Owner’ constitute 
latent ambiguities in the contracts.”  Id.  Because the clauses were latently ambiguous, the 
court relied on parol evidence to determine the intent and understanding of the parties.  It 
concluded that the general contractor had intended to create a pay-if-paid clause and then 
assessed the testimony of the various subcontractors at trial as to whether each had the 
same understanding.  The court ultimately concluded that four of the five subcontractors 
shared the general contractor’s understanding of the clause and that the clause was a basis 
for the general contractor’s defense as to the claims of those subcontractors.  It therefore 
reversed the trial court’s ruling as to those subcontractors and upheld the judgment in favor 
of the fifth subcontractor.  Id. at 356. 
Summary 
While a minority of jurisdictions regard pay-if-paid clauses as void as against public 
policy, the majority approach is to recognize both “pay-when-paid” and “pay-if-paid” 
clauses, with some preference given to construing such a clause as a timing rather than a 
risk-shifting provision.  To distinguish one from the other under Virginia law, a court is to 
look first to the language of the provision.  If the language appears to contemplate that the 
subcontractor will ultimately be paid, the provision will be construed as a pay-when-paid 
clause.  If the contractual language clearly sets forth owner payment as a condition 
precedent to the general contractor’s liability to the subcontractor, as in Gilbane, it will be 
construed as a pay-if-paid clause.  If the language contains a latent ambiguity, the court 
looks to parol evidence to determine the intent of the parties. 
 
 
13 
 
B. 
Facts and Proceedings 
The record in this case discloses the following facts, which are in many respects 
undisputed, and the resulting legal proceedings that have led to this appeal.  
The Prime Contract  
This case arose out of a construction project undertaken by George Mason 
University (“George Mason” or “Owner”), a Virginia state university located in Fairfax, 
Virginia, to renovate a student union building (the “Project”).  On July 20, 2010, George 
Mason contracted with Dustin Construction Inc. (“Dustin” or “Contractor”), a general 
contractor based in Ijamsville, Maryland, to conduct the renovation (“the Prime Contract”).  
The Prime Contract consisted of a three-page document setting out the particulars of the 
Project that was signed by representatives of George Mason and Dustin.  That document 
incorporated various other documents, including a 49-page form attachment setting forth, 
in 50 multi-part sections, standard general contract terms approved by the Virginia 
Department of General Services for state government construction contracts.3  
A few days later, on July 30, 2010, George Mason issued a “Notice to Proceed” with 
the Project to Dustin.  Although the Prime Contract stated a “Substantial Completion” date 
of November 15, 2010,4 the Notice to Proceed set forth a substantial completion date of 
November 30, 2010.  The record does not explain this discrepancy. 
                                              
3 While the record includes a copy of the standard Virginia procurement terms and 
conditions, it does not include the various other documents that were incorporated in the 
Prime Contract. 
4 Under the standard Virginia state contract terms, “Substantial Completion” – as 
distinct from “Final Completion” – means “[t]he condition when the Owner agrees that the 
14 
 
The Electrical Subcontract 
To accomplish certain electrical work required under the Prime Contract, Dustin 
subcontracted with Young Electrical Contractors Inc. (“Young” or “Subcontractor”), an 
electrical subcontractor based in Laurel, Maryland, to perform that work.  Dustin gave 
Young notice to proceed as a subcontractor on August 5, 2010, although Dustin and Young 
did not enter into a written contract until October 15, 2010 (“the Subcontract”).5  The 
Subcontract provided that Dustin would pay Young $1,148,860 for satisfactory completion 
of the work required by the Subcontract.  Subcontract, §2. 
The written Subcontract included a section concerning change orders.  Subcontract, 
§13.  That section defined a change order as “a written order … signed by the Contractor 
… authorizing a change in the Work or an adjustment in the Subcontract Sum or 
Subcontract Time.”  Among other things, that section provided that the Subcontract Sum 
or Subcontract Time could be changed only by a change order and permitted the 
Subcontractor to request an “equitable adjustment” of the Subcontract Sum or Subcontract 
Time via change order.  Subcontract, §13(a), (c).   
                                              
Work, or a specific portion thereof, is sufficiently complete, in accordance with the 
Contract Documents, so that it can be utilized by the Owner for the purposes for which it 
was intended….” 
5 The parties appear to agree that the Subcontract was entered into on October 15, 
2010 – and the Subcontract itself recites that it was “made as of October 15, 2010” – 
although a number of later dates appear on the document.  The written Subcontract was 
stamped as “entered” with a date of December 29, 2010.  Young’s representative 
apparently signed the written contract on December 10, 2010; Dustin’s representative 
executed it on December 22, 2010. 
15 
 
As we shall see, the Subcontract also contained three provisions that might be 
considered conditional payment clauses of one kind or another and that have played a 
prominent role in this litigation.  Subcontract, §§2(c), 13(c), 27(f).  
Delay and Change Requests 
 
Young’s work on the Project was not substantially completed until March 8, 2011, 
three months beyond the substantial completion date (November 30, 2010) set by George 
Mason in the Notice to Proceed.  The record is not clear on the precise cause or causes of 
the delay or the extent to which it involved only electrical work or other aspects of the 
Project. 
As permitted under the Subcontract, Young submitted change requests to Dustin 
based on increased costs.  In those change requests, Young asked Dustin to issue change 
orders increasing the Subcontract Sum by specified amounts.  It appears from the record 
of this case that the Subcontract Sum was increased from the original $1,148,860 for 
various reasons that Young described in one of its change requests as “owner initiated due 
to design changes, design errors, unforeseen conditions and additions/deletions of the work 
originally required.”  According to Young, these changes resulted in “excessive 
management time by the project management team, a constant interruption in the job flow, 
lower labor productivity, an excessive amount of rework of work already installed, plus a 
serious negative cash flow due to the changes needed to be negotiated but the work being 
needed as the contract work was being installed.”  As a result, the Subcontract Sum was 
apparently increased by $317,193. 
16 
 
Two change requests submitted by Young that did not result in changes to the 
Subcontract Sum are at issue in this case:  Change Request 1066 and Change Request 
1067.6   
Young submitted Change Request 1066 to Dustin on September 14, 2011.  That 
change request asked Dustin to issue a change order increasing the Subcontract Sum by 
$259,034.99 for “extended overhead costs associated with [George Mason]’s extension of 
the contract” past the original substantial completion date.  Attached to the change request 
was a listing of various overhead expenses comprising the change request.  It is not clear 
from the record whether Dustin responded to Young contemporaneously in any way.  More 
than a year later, on November 16, 2012, Dustin submitted Change Request 1066 to George 
Mason along with Dustin’s own delay claim.7  At George Mason’s request, Dustin 
subsequently separated Change Request 1066 from Dustin’s own claim, reduced the 
amount requested in Young’s Change Request 1066 to $180,010.21, and resubmitted it to 
George Mason on March 4, 2013 – denominated as Dustin’s Proposed Change Order 135. 
On February 15, 2013, Young submitted Change Request 1067 to Dustin.  In that 
change request, Young asked Dustin to issue a change order increasing the Subcontract 
Sum by $274,812.33 for additional costs associated with delay and disruption, among other 
                                              
6 A third change request, denominated Change Request 1047, was originally at issue 
in this case, but was resolved when Dustin paid Young the amount requested in February 
2014 while this case was pending in the Circuit Court.  
7 The record does not indicate why Dustin delayed submitting this proposal to 
George Mason or whether it informed Young when it submitted the proposed change order. 
17 
 
reasons, which, Young said, were not attributable to Young.  Attached to the change 
request was a breakdown of Young’s costs and a narrative description of the causes of 
those costs.  The narrative included the description quoted above concerning prior 
approved increases in the Subcontract Sum.  The narrative went on to describe issues with 
sequencing the work, requests for information, changes to the work, excessive down time, 
and lack of negotiation.  Again, it is not clear from the record whether Dustin responded 
directly to Young concerning Change Request 1067.  However, approximately a month 
later, on March 19, 2013, Dustin submitted its Proposed Change Order 136 to George 
Mason, which incorporated Young’s Change Request 1067.  Again, it is not clear from the 
record what, if any, information Dustin shared with Young concerning this submission. 
Young sues Dustin 
Five months later, on September 3, 2013, while the two change requests were 
apparently still pending with George Mason, Young filed a complaint against Dustin in the 
Circuit Court for Montgomery County.  The complaint consisted of a single count alleging 
that Dustin had breached the Subcontract.   
Young’s complaint asserted that Dustin was responsible for “scheduling and 
sequencing of the trades” and for administration of the Prime Contract with George Mason, 
that Dustin had directed Young to perform additional work, and that Young was not 
responsible for the delay in achieving substantial completion of the work.  Young further 
alleged that, because of the delays in the Project, Young had been directed to work overtime 
and had incurred additional costs.  Young further contended that it had submitted its claims 
arising from the additional work to Dustin, that Dustin was required by the Subcontract to 
18 
 
submit the claims to George Mason “if [Dustin] considered that the claims arose due to 
[George Mason]’s actions or inactions,” that there was no indication that Dustin had 
submitted the claims to George Mason, and that Dustin had therefore waived the right to 
assert that the claims were not its own responsibility.  The complaint concluded that Dustin 
had breached the Subcontract by (1) failing to coordinate and sequence the work, (2) 
directing additional work and overtime that it failed to pay for, and (3) not paying the costs 
of the extended period of contract performance.   
George Mason Rejects Change Request 1066 
On September 17, 2013, shortly after Young’s complaint had been filed, George 
Mason rejected Dustin’s Proposed Change Order 135, which incorporated Young’s 
Change Request 1066.  There appears to be some dispute, or at least uncertainty, as to 
whether George Mason also rejected Change Request 1067 at the same time.  In the Circuit 
Court, Dustin submitted an affidavit of its project manager stating that George Mason 
rejected Change Request 1067 at the same time it rejected Change Request 1066, but the 
documentation submitted together with the affidavit does not appear to support that 
statement.8  In any event, there appears to be no dispute that Dustin was not paid by George 
                                              
8 At the hearing in the Circuit Court, Dustin’s counsel stated that Dustin had 
“bundled” Change Request 1066 and Change Request 1067 into one proposed change order 
– 136 – which George Mason rejected.  However, from the documents submitted in 
connection with the summary judgment motion, it appears that Dustin submitted two 
separate proposed change requests to George Mason – 135 and 136 – corresponding to 
Young’s change requests and that one – 135 – was rejected by George Mason.  It is perhaps 
also notable that other statements made in the project manager’s affidavit – that Young had 
not provided notice that it would submit change requests – were retracted by Dustin when 
Young submitted documentation that it had in fact given notice.  For its part, Young 
contended that George Mason’s rejection – whatever it covered – did not constitute a 
19 
 
Mason with respect to its proposed change orders based on Young’s Change Requests 1066 
and 1067.  It is also undisputed that Dustin did not pay Young the amount sought in either 
of those change requests.   
Dustin’s Motion for Summary Judgment 
On October 21, 2013, one and a half months after this action had commenced and 
one month after George Mason rejected Dustin’s proposed Change Order 135, Dustin filed 
a motion for summary judgment together with its answer to the complaint.  In its summary 
judgment motion, Dustin argued that its “core, dispositive defense” was that Young had 
failed to make its claims on a timely basis.  Dustin quoted §13(c)9 of the Subcontract 
concerning changes.  In particular, it argued that Young had failed to comply with notice 
requirements that the Virginia Supreme Court had held were to be strictly construed.  
Dustin initially submitted a supporting affidavit attesting, in part, to a lack of notice, but 
later retracted that testimony.  Ultimately, the Circuit Court did not resolve the case on the 
timeliness of notice issue raised by Dustin and that issue is not before us. 
Quoting the same provision of the Subcontract, Dustin also argued that it was not 
liable to Young for the amounts sought in the two change requests because George Mason 
                                              
“denial” under §47 of the standard Virginia government conditions incorporated in the 
Prime Contract.  Given our disposition of this appeal, the questions as to whether, when, 
and how George Mason rejected the two change requests can be sorted out during 
discovery after remand.   
9 In the memorandum accompanying its motion, Dustin repeatedly cited §13(a), but 
it is clear from its argument and the quotation in its memorandum that it was actually 
referring to §13(c) of the Subcontract. 
20 
 
had denied its proposed change orders based on those requests and thus a condition 
precedent for Dustin’s liability to Young – payment by George Mason – was not satisfied.  
Section 13(c) of the Subcontract states: 
In the event a change is made to this Contract as a result of the Owner’s 
change to the Prime Contract and such change causes an increase or 
decrease in the cost of and/or the time required for performance under 
this Subcontract, Subcontractor may submit to Contractor in writing in 
accordance with the requirements of the Changes Clause of the General 
Contract a request for an equitable adjustment in the Subcontract Sum 
and/or the Subcontract Time, or both, within ten (10) calendar days 
from the date of receipt by Subcontractor of notification from 
Contractor of the change or such lesser time as is required to permit 
Contractor to comply with the terms of the Prime Contract.  Contractor 
shall pay to Subcontractor that amount paid by the Owner to Contractor 
on account of any such change to this Subcontract, less any markup and 
other amounts due Contractor on account of such change.  Contractor 
shall have no liability to Subcontractor on account of any such Owner 
initiated change except for such amount, if any.  
 
Dustin pressed a similar argument under §27(f) of the Subcontract, which is entitled 
“Resolution of Disputes Involving Owner.”  Section 27(f) states: 
Contractor shall have no liability to Subcontractor on account of any 
claim, suit or appeal arising under or relating to the Prime Contract or 
the Owner’s conduct thereunder except that recovered by the 
Contractor from the Owner on Subcontractor’s behalf, if any, less any 
markups and other amounts due Contractor on account of such claim, 
suit or appeal. 
 
Although neither clause contains the phrase “condition precedent,” in Dustin’s view, the 
two provisions of the Subcontract nevertheless functioned as risk-shifting provisions – pay-
21 
 
if-paid clauses – and conditioned its liability to Young on Dustin’s receipt of payment from 
George Mason.10 
The Circuit Court Awards Summary Judgment 
On January 22, 2014, prior to any discovery in the case, the Circuit Court held a 
hearing at which it heard legal argument on Dustin’s summary judgment motion.  At the 
hearing, Dustin relied primarily on its argument that Young’s claims were precluded by 
§13(c) of the Subcontract.  Young countered that discovery was necessary before it could 
be said that it was undisputed that the claims were the result of changes initiated by George 
Mason.   
The Circuit Court took the matter under advisement that day, and delivered an oral 
decision at a continuation of the hearing on February 11, 2014.  In its oral opinion, the 
Circuit Court explained that its review of the record demonstrated that Dustin had 
submitted both change requests to George Mason.  In addition, the court held that summary 
judgment in Dustin’s favor was appropriate because George Mason had not paid Dustin 
for either request.  The Circuit Court did not attempt to resolve whether George Mason had 
rejected the second proposed change order (involving Young’s Change Request 1067).  
The court said that it was irrelevant to its determination whether or not George Mason had 
actually denied both change requests as Dustin had not received payment for them from 
George Mason.   
                                              
10 Dustin also asserted that Young had not followed the Subcontract’s dispute 
resolution process.  That issue was not ruled on below, and is not before us. 
22 
 
The Circuit Court’s decision was based not on §13(c) or §27(f) of the Subcontract 
– the provisions on which Dustin had based its summary judgment motion – but rather on 
§2(c) of the Subcontract and §37(a)(1) of the standard Virginia terms incorporated in the 
Prime Contract between George Mason and Dustin.  (Neither party had mentioned §2(c) 
of the Subcontract or §37(a)(1) of the standard conditions in their motion papers or 
addressed those provisions at oral argument.) 
Section 2(c) of the Subcontract reads, in pertinent part, as follows:  
Contractor’s obligation to pay all or any portion of the Subcontract Sum 
to Subcontractor, whether as a progress payment, retainage or final 
payment, is contingent, as a condition precedent, upon the Contractor’s 
receipt of payment from the Owner of all amounts due Contractor on 
account of the portion of the Work for which the Subcontractor is 
seeking payment. 
 
Subcontract, §2(c) (emphasis added).  As is evident, that subsection of the Subcontract 
contains the magic phrase “condition precedent” that the Virginia Supreme Court had 
declared in Galloway to be a clear expression of a risk-shifting pay-if-paid clause. 
The other provision cited by the Circuit Court – Section 37(a)(1) of the standard 
conditions incorporated in the Prime Contract between George Mason and Dustin – is one 
of the standard terms in Virginia state government contracts.  It references a Virginia 
statute11 that requires a contractor in a Virginia state contract to pay a supplier or 
subcontractor within seven days of receiving payment from the owner of a project or to 
notify the state agency and the supplier or subcontractor why payment is being withheld.   
                                              
11 Virginia Code, §2.2-4354. 
23 
 
The Circuit Court signed a written order granting summary judgment in favor of 
Dustin that same day.  Young moved for reconsideration, which the Circuit Court denied 
on April 3, 2014.  Young timely noted its appeal.   
The Court of Special Appeals Affirms 
On October 3, 2016, the Court of Special Appeals affirmed the Circuit Court’s grant 
of summary judgment in an unreported opinion.  Like the Circuit Court, the intermediate 
appellate court relied on §2(c) of the Subcontract, but also referred to §13(c) and §27(f) – 
the provisions pressed by Dustin – after it concluded that there was no dispute that George 
Mason had initiated the changes for which Young sought payment.  At the request of 
Dustin, the Court of Special Appeals re-issued its decision on December 28, 2016, as a 
reported opinion.  231 Md. App. 353 (2016).  The reported opinion was identical to the 
original version of the opinion with the addition of a footnote that stated the Subcontract 
provided a mechanism under which Young could have pursued compensation directly from 
George Mason instead of Dustin, if it had acted within six months of the denial of its change 
requests.  231 Md. App. at 359 n.4.  The court cited §27 of the Subcontract and §47 of the 
standard Virginia state government contract terms in the Prime Contract in reaching this 
conclusion.  Before us, both Dustin and Young agree, although for different reasons, that 
the analysis in this footnote is an incorrect interpretation of the contracts under Virginia 
law.  In any event, the footnote in the Court of Special Appeals opinion appears to be dicta, 
unnecessary to its resolution of the case.12 
                                              
12 At oral argument before us, Dustin suggested alternative ways that Young could 
have pursued claims against George Mason.  The merits of Dustin’s suggestions are not 
24 
 
In its decision, the intermediate appellate court held that that there was no dispute 
as to any material fact, that all three payment provisions of the Subcontract were valid, and 
that they justified Dustin’s refusal to accept Young’s change requests.  The intermediate 
appellate court first agreed with the Circuit Court that §2(c) was a pay-if-paid clause that 
made payment by George Mason to Dustin under the Prime Contract a condition precedent 
to payments by Dustin to Young under the Subcontract.  231 Md. App. at 363-64.  
However, it held that §13(c) was the payment provision “most relevant” to the current 
dispute and construed the language of §13(c) and §27(f), when read alone, to be pay-when-
paid clauses similar to the provision at issue in Dyer rather than pay-if-paid provisions.  Id. 
at 364-65.  However, the intermediate appellate court reasoned that any payments covered 
by those provisions were also subject to the condition precedent set forth in §2(c), a pay-
if-paid clause.  Id. at 365-66.  Accordingly, the Court of Special Appeals affirmed the 
Circuit Court’s grant of summary judgment.   
Young filed a petition for a writ of certiorari, which we granted on April 4, 2017.13 
 
 
                                              
currently before us and, accordingly, we do not attempt to resolve whether Young could 
have pursued an alternative procedure under Virginia law for asserting its claims. 
13 Young originally sought a writ of certiorari on October 28, 2016.  After we denied 
that petition, Young renewed its request when the Court of Special Appeals re-issued its 
decision as a reported opinion.  
25 
 
II 
Discussion 
The question before us is whether the Circuit Court properly granted summary 
judgment based on its determination that there were no disputed questions of material fact 
and that Dustin was entitled to judgment as a matter of law under the court’s construction 
of the Subcontract in conjunction with the Prime Contract.14 
A. 
Governing Law and Standard of Review 
1. Applicable Substantive Law 
Contract interpretation is governed by the law of the place of contract or the law 
chosen by the parties.  Cunningham v. Feinberg, 441 Md. 310, 326 (2015).  The 
Subcontract here explicitly provides that it is to be governed by Virginia law.  Subcontract, 
§31.  The Prime Contract also explicitly incorporates various requirements imposed by 
Virginia statutes and regulations concerning Virginia state government procurement.  
Virginia courts “review issues of contract interpretation de novo.”  Bailey v. 
Loudoun Cty. Sheriff’s Office, 762 S.E.2d 763, 766 (2014).  Like Maryland law, Virginia 
law applies an objective interpretation of a contract to discern what the parties intended.  
Virginia courts assume that each provision of a contract has a purpose, and must be read in 
context harmoniously with the other provisions.  See, e.g., TravCo Ins. Co. v. Ward, 736 
                                              
14 Young raised several other issue in its petition for certiorari, which we need not 
address, in light of our decision on this question. 
26 
 
S.E.2d 321, 325 (Va. 2012).  In interpreting contracts, the Virginia Supreme Court has 
stated: 
       It is the function of the court to construe the contract made by the parties, 
not to make a contract for them.  The question for the court is what did the 
parties agree to as evidenced by their contract.  The guiding light in the 
construction of a contract is the intention of the parties as expressed by them 
in the words they have used, and courts are bound to say that the parties 
intended what the written instrument plainly declares. 
 
W.F. Magann Corp. v. Virginia-Carolina Electrical Works, Inc., 123 S.E.2d 377, 381 (Va. 
1962) (citations omitted); see also Wilson v. Holyfield, 313 S.E.2d 396, 398 (Va. 1984) (“It 
is the duty of the court to construe a contract as written.”). 
2. Applicable Procedural Law 
Although we look to another state’s substantive law, the standard for summary 
judgment is governed by the law of the forum – in this case, Maryland law.  Goodwich v. 
Sinai Hosp. of Baltimore, Inc., 343 Md. 185, 204-207 (1996). 
Under the Maryland Rules, a circuit court may grant summary judgment only if 
there is no genuine dispute as to any material fact, and the moving party is entitled to 
judgment as a matter of law.  Maryland Rule 2–501(f).  The court is to consider the record 
in the light most favorable to the non-moving party and consider any reasonable inferences 
that may be drawn from the undisputed facts against the moving party.  Mathews v. Cassidy 
Turley Maryland, Inc., 435 Md. 584, 598 (2013).  Because the circuit court’s decision turns 
on a question of law, not a dispute of fact, we review a circuit court’s decision to grant 
summary judgment without according deference to the circuit court’s conclusions, or those 
of the intermediate appellate court.  Id.   
27 
 
If we should reach a different conclusion than the circuit court on the basis on which 
it granted summary judgment, we ordinarily do not try to sustain the circuit court’s decision 
on a different ground.  Mathews, 435 Md. at 598.  Such a course would interfere with the 
discretion that a trial court normally enjoys to deny, or defer until trial, the merits of 
summary judgment on a particular issue.  Id.  We may nonetheless affirm summary 
judgment on a different ground if the trial court would have no discretion as to the particular 
issue.  Id.  
B. 
Whether Dustin was Entitled to Summary Judgment  
 
At the outset, we must confess that much in this case has left us scratching our head.  
To recap, Dustin initially sought summary judgment primarily on Young’s alleged failure 
to give timely notice of its claims, later switched its flagship contention to the apparent 
decision of George Mason not to accept the change requests (a decision not fully 
documented in this record), and relied on §13(c), and to a lesser extent §27(f), as risk-
shifting pay-if-paid clauses.  The Circuit Court ruled in Dustin’s favor, although not on the 
basis of the Subcontract provisions cited by Dustin, but rather on the basis of §2(c) of the 
Subcontract (a pay-if-paid clause), and §37(a)(1) of the standard Virginia conditions 
incorporated in the Prime Contract, neither of which had been mentioned by either party in 
the papers or argument on Dustin’s summary judgment motion.  The Court of Special 
Appeals, attempting to bridge this gap as best it could, affirmed on the basis of the 
provisions urged by Dustin (although it construed them to be pay-when-paid provisions), 
as well as those cited by the Circuit Court, and suggested that Young should have sued 
George Mason directly under §27 of the Subcontract and §47 of the standard conditions in 
28 
 
the Prime Contract – a suggestion that both Dustin and Young agree is an incorrect 
interpretation of the contracts. 
And this is all in a context where we – like the trial court and intermediate appellate 
court – must not only decide the case based on Virginia (as opposed to Maryland) 
substantive law, but must decide a question that concerns Virginia state government 
procurement.  It perhaps goes without saying that this is not in our wheelhouse.15  So it is 
with some trepidation that we attempt to provide some clarity and, at the very least, do no 
harm. 
We first consider whether Dustin was entitled to summary judgment for the reason 
given by the Circuit Court.  We conclude that it was not and then go on to consider whether 
the Circuit Court would have been required to award summary judgment in Dustin’s favor 
for the reason originally urged by Dustin. 
1. 
Whether Dustin was Entitled to Summary Judgment under §2(c) 
The Circuit Court held that Dustin was entitled to summary judgment pursuant to 
§2(c) of the Subcontract and §37(a)(1) of the standard conditions in the Prime Contract 
because George Mason had not paid Dustin with respect to its proposed change orders 
based on the two change requests submitted to Dustin by Young.   
Although Dustin itself had not raised §2(c) as a basis for summary judgment, it may 
have appeared to the Circuit Court to be a more straightforward route to that end.  Section 
                                              
15 It is perhaps worth noting that we are seldom called upon to decide matters of 
Maryland state procurement, as the General Assembly has created a special forum for that 
task.  See Maryland Code, State Finance & Procurement Article, §15-201 et seq. 
29 
 
2(c) contains the key phrase “condition precedent” in that it made the “Contractor’s 
obligation to pay all or any portion of the Subcontract Sum to Subcontractor, whether as 
progress payment, retainage or final payment, … contingent, as a condition precedent, 
upon the Contractor’s receipt of payment from the Owner of all amounts due Contractor 
on account of the portion for the Work for which the Subcontractor is seeking payment.”  
Subcontract, §2(c) (emphasis added).  Under the Galloway decision, this language clearly 
creates a pay-if-paid clause, which would appear to reduce the issue simply to whether 
George Mason had paid Dustin.  The court thus would avoid having to determine whether 
the changes on which Change Request 1066 and Change Request 1067 were based were 
“owner-initiated,” whether George Mason had ever rejected Change Request 1067,16 
whether George Mason had rejected Change Request 1066 in the appropriate manner, or 
whether Dustin was deficient in some way in seeking George Mason’s approval, among 
other issues. 
This Occam’s Razor approach – preferring a simpler resolution over a complex 
resolution of a problem – seems a generally sensible approach.  However, it does not work 
in this instance.  Section 2(c) concerns payment of the Subcontract Sum – originally 
$1,148,860 and later increased by $317,193 through change orders.  But those costs are not 
the subject of this case.  For example, Change Request 1067 requested an additional 
                                              
16 The Circuit Court explicitly noted in its oral decision that it did not have to resolve 
this question. 
30 
 
$274,812.33 because of “additional costs associated with delay and disruption[,] none of 
which is attributable to Young.”  
Section 2(c) applies to “Contractor’s obligation to pay all or any portion of the 
Subcontract Sum.”  Unlike the payment clauses in Gilbane and Dyer, this clause does not 
concern Dustin’s contract liability to Young generally, but specifically payments to be 
made with respect to the Subcontract Sum.  Thus, in order to decide whether §2(c) applies 
to the damages sought by Young, one must first determine whether the alleged damages 
are part of the Subcontract Sum.  The notion that §2(c) would be “generally applicable” to 
all contract liability of Dustin is at odds with language of that section relating it to the 
Subcontract Sum and other provisions of the Subcontract related to particular types of 
damages. 
In its complaint, Young alleged the following bases for its contention that Dustin 
had breached the subcontract:  Dustin’s alleged failure to coordinate and sequence work, 
Dustin’s alleged direction to Young to perform additional work and uncompensated 
overtime, and Dustin’s alleged failure to pay for the costs of the extended period of contract 
performance.  At least some of these alleged damages appear to be outside the scope of 
§2(c).  For example, Young’s complaint seeks damages for delay that it attributes to Dustin 
and §39 of the Subcontract states that “Contractor [i.e., Dustin] shall be liable for any and 
all actual damages sustained as a result of delay.”17  Even assuming that George Mason 
                                              
17 Two §39’s appear in the Subcontract.  The reference above is to the second section 
with that designation. 
31 
 
initiated changes, what is in dispute is who is responsible for the delays and incidental costs 
of implementing those changes. 
Reading §2(c) to apply to all damages resulting from delay would establish a 
condition precedent that would bear no logical relation to those damages.  For example, 
under the Prime Contract, Dustin is responsible for coordinating and sequencing the work.  
If the delay were attributable to a failure by Dustin to carry out that obligation, there is no 
reason why George Mason would pay Dustin for failing to carry out Dustin’s own 
responsibilities under the Prime Contract.  The same would be true for portions of Young’s 
work that had to be redone because Dustin or one of its other subcontractors had destroyed 
Young’s work.  Section 28 of the Subcontract concerns disputes that do not involve the 
conduct of the Owner and, unsurprisingly, that provision does not include a pay-if-paid 
clause.18  The general application of §2(c) to payments other than those related to the 
Subcontract Sum would transform it into a blanket waiver by a subcontractor of delay 
damages, something that appears to be contrary to the intent of the parties. 
Young seeks other damages that are not necessarily related to delay, and that might 
be governed by §2(c).  In particular, the complaint alleged “Dustin breached the contract . 
. . by directing the performance of additional work which it failed and refused to pay for, 
[and] by directing overtime work which it has failed and refused to pay for[.]”  The record 
                                              
18 That provision sets forth certain alternative dispute mechanisms.  Whether an 
award of such damages would be precluded by a failure to pursue those procedures is not 
before us.  
32 
 
before us is insufficient to say those matters are governed by a clause with a condition 
precedent, particularly where no discovery has been conducted. 
The other provision relied upon by the Circuit Court in awarding summary judgment 
was §37(a)(1) of the standard Virginia procurement terms and conditions that were 
incorporated in the Prime Contract.  However, as noted earlier, that provision simply set 
forth the requirements of the Virginia “prompt payment” statute.  See Virginia Code, §2.2-
4354.  That statute requires Virginia state agencies to obligate their contractors to pay 
subcontractors promptly after the agency pays the contractor, or to notify the agency and 
subcontractor why it is not doing so.  It is designed to ensure that subcontractors are paid 
without delay, not to create a pre-condition to their payment.19  Thus, §37(a)(1) would not 
be a basis for awarding summary judgment in favor of Dustin in this case. 
2. 
Whether the Circuit Court was Required to Award Summary Judgment for a 
Different Reason 
 
We consider briefly whether the Circuit Court would have been required to award 
summary judgment in Dustin’s favor on a basis other than §2(c) of the Subcontract and 
§37(a)(1) of the standard terms incorporated in the Prime Contract.  The obvious basis to 
consider is the primary ground argued by Dustin before the Circuit Court:  that the breach 
of contract claim made by Young was based on Owner-initiated changes and that §13(c) 
                                              
19 In this regard it appears to be similar to the Maryland prompt payment statute 
relating to State agency construction contracts.  Maryland Code, State Finance & 
Procurement Article, §15-226; see also Maryland Code, Real Property Article, §9-301 et 
seq. 
33 
 
and §27(f) of the Subcontract are risk-shifting pay-if-paid clauses that preclude a judgment 
in favor of Young because George Mason has not paid Dustin with respect to that claim. 
We cannot say that the Circuit Court would be required to resolve those issues in 
Dustin’s favor as a matter of law on the current state of the record, as there appear to be 
open factual issues as to both elements of Dustin’s argument.  The ruling on the summary 
judgment motion in this case occurred prior to any opportunity for discovery and thus 
deprived the party opposing that motion of the opportunity to produce additional 
information relevant to the issues.  See Green v. H & R Block, Inc., 355 Md. 488, 502 & 
n.3 (1999).  In this case, where certain issues relate to the possible responsibility of the 
Owner for changes and delays and the Owner’s response to proposed change requests, and 
where, under the contract, Young did not deal directly with George Mason, discovery may 
well be important to determine the operative facts and whether they are undisputed. 
First, it is not at all clear, as Dustin argues, that it is undisputed that damages sought 
by Young relate to “Owner-initiated changes.”  (In relying on §2(c) of the Subcontract – 
which is not addressed to Owner-initiated changes – the Circuit Court did not need to 
determine whether it was undisputed that changes were Owner-initiated because that 
question was not material to its decision.)  Dustin argues that there is no dispute that 
Young’s claim is based on Owner-initiated changes, pointing to select quotations from 
Change Requests 1066 and 1067.20   
                                              
20 In affirming the Circuit Court, the Court of Special Appeals accepted Dustin’s 
argument in this regard.  For the reasons set forth in the text, we do not. 
 
34 
 
However, the Subcontract explicitly states “Nothing said or written in the 
prosecution or defense of any claim(s) against the Owner shall constitute or be regarded as 
an admission or declaration against interest of either party in any litigation or arbitration 
between Contractor and Subcontractor.”  Subcontract, §27(g).  The parties clearly 
contemplated a situation where the Owner (George Mason) would refuse to pay for certain 
costs and where the Contractor (Dustin) and Subcontractor (Young) must litigate who bears 
those costs.  Neither party apparently wanted to make what was said in a change request to 
the Owner binding in future litigation between the Contractor and Subcontractor.  Thus, 
placing conclusive weight on a statement made in a change request to resolve litigation 
between the Contractor and Subcontractor, particularly on a motion for summary judgment 
prior to discovery, appears to be contrary to the intent of the parties. 
Moreover, in the context of a motion for summary judgment, a court must view the 
evidence in a light most favorable to the non-moving party.  Mathews, 435 Md. at 598.  
“Even where the underlying facts are undisputed, if the undisputed facts are susceptible of 
more than one permissible factual inference, the choice between those inferences should 
not be made as a matter of law, and summary judgment should not be granted.”  Heat & 
Power Corp. v. Air Prod. & Chemicals, Inc., 320 Md. 584, 591 (1990).  The gravamen of 
Young’s complaint states that “[d]elays arose through no fault or negligence” of its own, 
and that “Dustin breached [its subcontract with Young] by failing to coordinate and 
sequence the work” and “not paying the costs of the extended period of contract 
performance.”  Read in context, Change Requests 1066 and 1067 support this theory and 
do not necessarily seek payment for Owner-initiated changes. 
35 
 
For example, read in the light most favorable to Young, Change Request 1066 is 
asking for reimbursement due to the contract running behind schedule.  Although this delay 
is associated with the changes George Mason made, it could also be that Dustin failed to 
implement those changes efficiently.  The two are not necessarily mutually exclusive, and 
this record is not sufficient to say that Young agrees that Dustin did not contribute to the 
delays. 
Second, as the Court of Special Appeals recognized, §13(c) and §27(f) of the 
Subcontract, when considered on their own terms, are somewhat similar to the payment 
provision at issue in Dyer.  They could thus be construed as pay-when-paid provisions that 
relate to the timing of payments and that do not relieve Dustin of liability to Young, even 
if George Mason declines to pay Dustin.  231 Md. App. at 364-65.21  The intermediate 
appellate court noted that there is “no timeframe” set forth for Dustin’s payment and “no 
apparent shift in the credit risk.”  Id. at 365.  These were the same reasons that the Virginia 
Supreme Court found the contract provision at issue in Galloway to have a latent 
ambiguity.  Galloway, 464 S.E.2d at 355.  If the parties are unable to identify other 
language in the Subcontract (apart from supplanting them with §2(c)) that indicates that 
these provisions should be construed as either a pay-when-paid or a pay-if-paid clause, a 
court could find them to be latently ambiguous.  Under Galloway, consideration of parol 
evidence concerning the parties’ intentions may thus be necessary to discern whether these 
                                              
21 See also Richard F. Kline, Inc. v. Shook Excavating & Hauling, Inc., 165 Md. 
App. 262, 274 (2005).   
36 
 
provisions were intended to operate as risk-shifting pay-if-paid clauses.22  No such 
evidence has yet been submitted by either party. 
For these reasons, the Circuit Court did not lack discretion to deny summary 
judgment on the ground actually advanced by Dustin.  Accordingly, we decline to affirm 
its decision based on that alternative ground. 
III 
Conclusion 
We hold that the Circuit Court erred as a matter of law when it applied §2(c) of the 
Subcontract and §37(a)(1) of the standard conditions incorporated in the Prime Contract to 
award summary judgment in favor of Dustin.  Section 2(c) is a pay-if-paid clause applicable 
to the Subcontract Sum and does not necessarily apply to the costs at issue in this case; 
§37(a)(1) incorporates a prompt payment provision of Virginia statutory law and does not 
create a condition precedent for payment of subcontractors.   
We decline to affirm the Circuit Court’s decision on alternative grounds.  Whether  
§13(c) or §27(f) of the Subcontract function as pay-if-paid clauses is a matter of Virginia 
law on which a court may be required to consider parol evidence.  No discovery has been 
                                              
22 In its opposition to summary judgment, Young argued that, even if §13(c) and 
§27(f) of the Subcontract were pay-if-paid clauses, the prevention doctrine would negate 
the effect of such a clause.  Under the prevention doctrine, a general contractor that 
materially contributes to the failure of a condition precedent under the contract may not 
rely on the absence of the condition precedent as a defense in a breach of contract action.  
See Aarow Equipment & Services, Inc., v. Travelers Cas. & Surety Co., 417 Fed. Appx. 
366, 372 (4th Cir. 2011).  Given our disposition of this appeal, we need not resolve that 
issue in this case and decline to speculate on how any facts relevant to that issue will be 
developed on remand. 
37 
 
conducted in this litigation and it is not at all clear on the existing record that there are no 
material facts in dispute, particularly when the record is viewed in the light most favorable 
to the non-moving party.  Accordingly, we shall remand this case to the trial court for 
further factual development. 
To the extent that there may be issues of Virginia contract law that remain at issue 
after fuller factual development in the Circuit Court that are deemed worthy of appeal or 
that meet the criteria for a writ of certiorari – i.e., issues for which a resolution is “desirable 
and in the public interest”23 – we, or the Court of Special Appeals, have the option of 
certifying a question of Virginia law to the Virginia Supreme Court for an authoritative 
resolution.24 
JUDGMENT OF THE COURT OF SPECIAL APPEALS VACATED 
AND CASE REMANDED WITH INSTRUCTIONS TO REMAND 
THE CASE TO THE CIRCUIT COURT FOR MONTGOMERY 
COUNTY FOR FURTHER PROCEEDINGS CONSISTENT WITH 
THIS OPINION. COSTS TO BE PAID BY RESPONDENT. 
                                              
23 Maryland Code, Courts & Judicial Proceedings Article, §12-203. 
24 Maryland Code, Courts & Judicial Proceedings Article, §12-601 et seq.