Pay when paid, and pay if paid clauses are pretty common, but can be misunderstood – both in operation and purpose. Below, I’ll attempt to provide some answers and clarifications to common questions and misconceptions about these contract provisions. First, however, before pay when paid and pay if paid clauses are discussed specifically, the background of the issue giving rise to these clauses should first be mentioned.
The Back and Forth Battle Between Statute and Contract
Getting paid in the construction field can be harder than it is in many other industries. There are many reasons for this, and pay when paid or pay if paid clauses are only the tip of the iceberg. There are also scope of work issues, inspection problems, change orders, and more. All of these things can create payment problems – and that’s before even mentioning the fact that failure rates in the construction industry are some of the highest in any market.
On one hand there are statutory laws protecting subs and suppliers, and on the other hand, there are contract provisions such as pay if paid clauses with which the GCs and property owners attempt to shift the project’s financial risk back down the ladder.
However, America believes that trade contractors…Read More