Posts

Showing posts from March, 2016

TOP TEN CONSTRUCTION CLAUSES PART VI—PAY IF PAID/PAY WHEN PAID

Image
This is the sixth installment in a ten-part series analyzing critical construction clauses.  This installment analyzes the “Pay If Paid” and “Pay When Paid” clauses. My first five articles can be found on our blog athttp://sotolawgroup.blogspot.com/.
A.Overview and Background
It is hard to understate the significance of the “Paid If Paid” provision (also known as the “Contingent Payment Provision”) and its less draconian counterpart, the “Pay When Paid” provision. The “Pay If Paid” Provision permits a general contractor to place the risk of an owner’s nonpayment upon its subcontractor notwithstanding the fact that the subcontractor fully performed its obligations and would be otherwise entitled to payment. A properly worded “Pay If Paid” provision can be a lifesaver for a general contractor and financially devastating to a subcontractor if the owner fails to issue payment. A “Pay When Paid” Provision, on the other hand, is simply construed by the courts as fixing a reasonable time for…