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Pay If Paid Clauses: What Happens When They’re Disallowed, But Not Entirely?

We have seen in recent posts that pay if paid clauses are generally disfavored and subject to strict review by courts. While pay if paid clauses are still enforceable in many states, provided the correct specific language is used, the clear trend is toward treating these clauses with greater scrutiny, or even disallowing them altogether. […]

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Pay If Paid: Shifting the Financial Burden “Down the Chain”

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 […]

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Pay If Paid Clause Infographic: In Which States Are They Void?

Pay if paid clauses are an attempt to shift the risk of non-payment on construction projects to subcontractors, suppliers, and other parties on the lower end of the payment chain. These clauses are looked upon with disfavor by courts in most states, and require certain specific language in order to be valid, where they can […]

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CFMA Says Owners Are Shifting Financial Risks Down The Contracting Chain – Here Are Your Options and the Construction Financial Management Association (CFMA) recently published some articles suggesting that “cash-strapped public and private owners are shifting greater risk onto contractors through onerous deal terms” [Owners Shift More Financial Risk as Recovery Remains Sluggish]. This is true, but it’s not necessarily new.  As this article will explain, this risk shifting tug […]

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Mechanics Lien Rights Cannot Be Waived – But Can They Be Reduced To Obscurity?

Most states prohibit parties from contracting out of their mechanics lien rights. A supplier or a subcontractor, in other words, cannot agree before starting a project that they will waive their lien rights.  These provisions – referred to as ‘no lien clauses‘ – are invalid in most jurisdictions because they violate “public policy.” The ‘no lien […]

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Do Your Mechanics Lien Rights Make Pay When Paid Clauses Irrelevant?

In 1791, Thomas Jefferson introduced the first mechanics lien law legislation and invented a public policy interest in the United States to always protect contractors, suppliers, and subcontractors from the risk of non-payment. As we’ve explored in previous posts, the ensuing 220 years brought epic battles between legislatures, courts, and parties about who should get […]

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Pay When Paid and Pay If Paid: Delaware

Sometimes, it seems as if determining whether pay if paid clauses and/or pay when paid clauses are enforceable in a certain state is nearly impossible. In many states, the question is only resolved by an analysis of the specific language of the individual clause itself, a labor intensive proceeding that, almost invariably, leads to confusion […]

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Pay If Paid and Pay When Paid: Colorado

Continuing our brief review of pay when paid and pay if paid clauses throughout the United States, this post examines these clauses under Colorado construction law. Colorado allows for both the timing mechanism of a pay when paid clause, and the burden-shifting of a pay if paid clause. Note, however, that if the desired effect […]

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Connecticut Pay If Paid Clauses

Pay if paid and pay when paid clauses are treated differently depending on the state. Some, like Illinois, North Carolina, and Wisconsin, have statutory restrictions on such clauses, and others, like California and New York, do not enforce them on public policy grounds. In other states, however, the enforceability of a pay if paid or […]

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Pay When Paid and Pay If Paid Clauses in California

In many states, courts are required to determine whether a pay if paid, or pay when paid contract clause functions as a risk-shifting clause, or merely a timing mechanism. This can be a tough challenge. Fortunately, pay when paid and pay if paid clauses in California are easy to figure out: they are unenforceable as […]

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Pay When Paid: Arizona

We’ve introduced pay when paid and pay if paid clauses in general, and started a state-by-state approach by discussing pay when paid clauses in Alabama. This post provides a more specific and in-depth look at pay when paid clauses in Arizona. Overview of Arizona Pay When Paid Clauses Through Argo As we’ve previously noted, the evaluation of pay when […]

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