A pay-if-paid clause means the general contractor is not obligated to pay their sub or supplier if and when the owner pays them. A pay-when-paid clause is the less severe of the two. This provision makes the GC liable for payment when the owner pays them, or within a “reasonable time.”
Are pay-when-paid clauses legal in California?
4 Dist.). California law distinguishes between pay-when-paid clauses and "pay-if-paid" clauses. Pay-if-paid clauses have been unenforceable for some time in California. However, if a clause is a pay-when-paid clause, it is enforceable, but only for reasonable time.
What is pay-if-paid pay-when-paid in construction?
Pay- when– paid refers to the more common practice in construction. Basically, it means the subcontractors will get paid once the general contractor has been paid by the owner. Pay –if -paid means that if the general contractor does not get paid by the owner, the subcontractors will not get paid either.
What is the payment clause in a construction contract?
What Is a Conditional Payment Clause? A conditional payment clause is a clause that conditions payment on some other event. For example, contractors often include a clause in their subcontracts that conditions payment to the subcontractor on the contractor first receiving payment from the owner.
What is an example of a paid when paid clause?
The following is an example of a pay-when-paid contingent payment clause: The contractor shall pay the subcontractor each progress payment no later than seven working days after the contractor receives payment from the owner.
What is the condition precedent for pay-if-paid?
To accomplish the goal of a clear and unambiguous pay-if-paid provision, a pay-if-paid will normally (1) expressly state that payment by the owner is a condition precedent to the contractor's duty to pay subcontractor; (2) include other conditions precedent, such as owner and architect's acceptance of subcontractors