{"id":905441,"date":"2026-03-11T15:24:53","date_gmt":"2026-03-11T21:24:53","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=905441"},"modified":"2026-03-11T15:41:31","modified_gmt":"2026-03-11T21:41:31","slug":"construction-contract-clauses-top-10-killer-part-2","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-clauses-top-10-killer-part-2\/","title":{"rendered":"Top 10 Killer Construction Contract Clauses, Part 2: Pay-If-Paid and Pay-When-Paid"},"content":{"rendered":"\n<p>Jessica duHoffmann and Jonathan Neri | <a href=\"https:\/\/www.pilieromazza.com\/top-10-killer-construction-contract-clauses-part-2-pay-if-paid-and-pay-when-paid\/\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">PilieroMazza<\/a><\/p>\n\n\n\n<p>In the world of construction, it is essential for both prime contractors and lower-tier subcontractors to carefully manage financial risk when negotiating subcontract agreements. While a party\u2019s ability to distinguish and understand\u00a0<strong>pay-if-paid<\/strong>\u00a0and\u00a0<strong>pay-when-paid<\/strong>\u00a0clauses\u2014a critical first step in identifying financial risk\u2014the analysis should not stop there.\u00a0<strong><em>To protect the rights of both the prime contractor and subcontractor, proper management of financial risk also requires knowledge of applicable state laws and the circumstances affecting the enforceability of such clauses under a given subcontract.<\/em><\/strong>\u00a0Visit this\u00a0<a href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-clauses-top-10-killer-part-1\/\" target=\"_blank\" rel=\"noreferrer noopener\">link<\/a>\u00a0to access Part 1 in this series.<\/p>\n\n\n\n<p><strong>Background<\/strong><\/p>\n\n\n\n<p><strong>Pay-if-paid<\/strong>&nbsp;clauses are conditional payment provisions commonly included in construction subcontracts. The intent of a pay-if-paid clause is to shift the risk of loss from the prime contractor to its subcontractors by making the project owner\u2019s payment to the prime contractor a&nbsp;<em>condition precedent<\/em>&nbsp;to the prime contractor\u2019s obligation to pay its subcontractors.&nbsp;<\/p>\n\n\n\n<p>Alternatively,&nbsp;<strong>pay-when-paid<\/strong>&nbsp;clauses relate to the timing of the subcontractor\u2019s payment, allowing a contractor to delay payment until it receives payment from the owner, but not indefinitely. In other words, a pay-when-paid clause functions as a timing mechanism, permitting the prime contractor to delay payment to its subcontractors based on when it receives payment from the owner, provided such delay is reasonable under the circumstances and the applicable jurisdiction\u2019s laws. &nbsp;<\/p>\n\n\n\n<p>Whether a clause is a pay-if-paid or pay-when-paid clause depends on its how it is drafted and is often the subject of contract disputes.<\/p>\n\n\n\n<p><strong>Enforceability<\/strong><\/p>\n\n\n\n<p>Compared to pay-when-paid clauses, the enforceability of pay-if-paid clauses is more frequently disputed. Some states have enacted legislation voiding such clauses as against public policy, while the majority of states will enforce a clear and unambiguous clause in a subcontract. The enforceability of such clauses becomes more complicated when a prime contractor posts a payment bond protecting subcontractors and suppliers from non-payment on a public or private project. Some states have enacted laws that render pay-if-paid provisions unenforceable in connection with mechanics\u2019 lien and payment bond rights. In the absence of legislation, some courts have held that such clauses contravene lien and bond laws and are unenforceable. For instance, federal courts have almost unanimously held that such clauses are unenforceable in the context of the Federal Miller Act.&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>Takeaway<\/strong><\/p>\n\n\n\n<p>To properly manage financial risk when negotiating construction contracts, parties must pay close attention to the express language of conditional payment provisions. They must further consider what, if any, state laws preclude or limit such provisions and assess how those laws impact a subcontractor\u2019s bond and lien rights.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jessica duHoffmann and Jonathan Neri | PilieroMazza In the world of construction, it is essential for both prime contractors and lower-tier subcontractors to carefully manage financial risk when negotiating subcontract agreements. While a party\u2019s ability to distinguish and understand\u00a0pay-if-paid\u00a0and\u00a0pay-when-paid\u00a0clauses\u2014a critical first step in identifying financial risk\u2014the analysis should not stop there.\u00a0To protect the rights of&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-clauses-top-10-killer-part-2\/\">Continue reading <span class=\"screen-reader-text\">Top 10 Killer Construction Contract Clauses, Part 2: Pay-If-Paid and Pay-When-Paid<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,7568,11156],"class_list":["post-905441","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-pay-if-paid-clause","tag-pay-when-paid-clause","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Top 10 Killer Construction Contract Clauses, Part 2: Pay-If-Paid and Pay-When-Paid - Advise &amp; Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-clauses-top-10-killer-part-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Top 10 Killer Construction Contract Clauses, Part 2: Pay-If-Paid and Pay-When-Paid - Advise &amp; Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Jessica duHoffmann and Jonathan Neri | PilieroMazza In the world of construction, it is essential for both prime contractors and lower-tier subcontractors to carefully manage financial risk when negotiating subcontract agreements. 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