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Contingent Payment Clauses

in the 50 States 2020

Published by:

Foundation of the American Subcontractors Association, Inc.

1004 Duke Street

Alexandria, VA 22314-3588

Telephone: (703) 684-3450

Email: [email protected]

Web site: www.fasaonline.com

65 East State Street, Suite 1800

Columbus, Ohio 43215-4294

Donald W. Gregory, Esq.

Eric B. Travers, Esq.

[email protected]

General Counsel to the American Subcontractors Association, Inc.

publication may be reproduced, stored in a retrieval system or transmitted in any form or by any

means, electronic, mechanical, photocopying, recording or otherwise, without obtaining prior

written permission from the copyright owner.

DISCLAIMER: This publication is for informational purposes only and does not contain legal

advice. Individual circumstances vary widely, so readers should not act on the information

provided herein and should consult legal counsel for specific legal advice.

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About ASA and FASA

The American Subcontractors Association amplifies the voice of and

leads trade contractors to improve the business environment for the

construction industry and to serve as a steward for the community.

The ideals and beliefs of ASA are ethical and equitable business

practices, quality construction, a safe and healthy work environment,

integrity and membership diversity.

The Foundation of the American Subcontractors Association, Inc., a

section 501(c)(3) organization under the U.S. Internal Revenue Code,

is the educational arm of ASA. FASA is an independent entity devoted

to development of quality educational information.

Acknowledgments

A sincere thank you to the many construction law attorneys who

contributed to this publication of Contingent Payment Clauses in the

50 States 2020. We appreciate the efforts of these attorneys in

providing this important reference. We would like to recognize the

contributions of Kegler Brown Hill + Ritter summer associate Brady

R. Wilson to this publication.

iii

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Table of Contents

Introduction ............................................................................................................. 1

Alabama .................................................................................................................. 3

Alaska ..................................................................................................................... 3

Arizona .................................................................................................................... 3

Arkansas ................................................................................................................. 4

California ................................................................................................................. 4

Colorado ................................................................................................................. 4

Connecticut ............................................................................................................. 5

Delaware ................................................................................................................. 5

District of Columbia ................................................................................................. 5

Florida ..................................................................................................................... 6

Georgia ................................................................................................................... 6

Hawaii ..................................................................................................................... 7

Idaho ....................................................................................................................... 7

Illinois ...................................................................................................................... 7

Indiana .................................................................................................................... 8

Iowa ........................................................................................................................ 8

Kansas .................................................................................................................... 9

Kentucky ................................................................................................................. 9

Louisiana ................................................................................................................. 9

Maine .................................................................................................................... 10

Maryland ............................................................................................................... 10

Massachusetts ...................................................................................................... 10

Michigan ................................................................................................................ 10

Minnesota .............................................................................................................. 11

Mississippi ............................................................................................................. 11

Missouri ................................................................................................................. 11

Montana ................................................................................................................ 12

Nebraska ............................................................................................................... 12

Nevada .................................................................................................................. 12

New Hampshire ..................................................................................................... 13

New Jersey ........................................................................................................... 13

New Mexico ........................................................................................................... 13

New York ............................................................................................................... 14

North Carolina ....................................................................................................... 14

North Dakota ......................................................................................................... 15

Ohio ...................................................................................................................... 15

Oklahoma .............................................................................................................. 16

Oregon .................................................................................................................. 16

Pennsylvania ......................................................................................................... 17

Rhode Island ......................................................................................................... 17

South Carolina ...................................................................................................... 17

South Dakota ........................................................................................................ 18

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Tennessee ............................................................................................................ 18

Texas .................................................................................................................... 18

Utah ...................................................................................................................... 19

Vermont ................................................................................................................ 19

Virgin Islands ......................................................................................................... 19

Virginia .................................................................................................................. 20

Washington ........................................................................................................... 20

West Virginia ......................................................................................................... 21

Wisconsin .............................................................................................................. 21

Wyoming ............................................................................................................... 22

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Introduction

A contingent payment clause is a contractual provision that makes payment

contingent upon the happening of some event. In construction subcontracts, the typical

contingent payment clause makes the subcontractor's payment contingent upon the

payment of the contractor by the owner.

Contingent payment clauses take on one of two forms in subcontract agreements. Some

clauses link the timing of the subcontractor's payment to the time when payment is made

by the owner. These are called "pay-when-paid" clauses. Other clauses specify that the

owner must pay the contractor in order for the subcontractor to ever receive payment.

These provisions that shift entitlement to payment are called "pay-if-paid" clauses. Even

though most states distinguish between the two types of clauses, a few jurisdictions find

that the provisions have the same exact legal effect.

For more than 30 years, most state courts have held that contractors cannot indefinitely

withhold payment from subcontractors based upon a "pay-when-paid" clause. Instead,

"pay-when-paid" clauses require a contractor to pay its subcontractors within a

"reasonable time" of the completion of satisfactory work.

In contrast, "pay-if-paid" clauses often allow contractors to permanently withhold payment

from their subcontractors where the owner has failed to pay the contractor. Because of

the harshness of such a provision, most states only enforce "pay-if-paid" clauses if the

contract unambiguously expresses that the parties intended for the subcontractor to only

be paid if the contractor is paid.

As states have moved toward protecting the rights of subcontractors, some state courts

have decided not to enforce "pay-if-paid" provisions. In addition, a growing number of

states have enacted laws that declare such contractual provisions void and against public

policy.

This manual attempts to summarize the basic stance of each of the 50 states with

respect these two types of contingent payment clauses. The following information is

displayed for all states that have applicable law on this issue:

 Whether a "pay-if-paid" clause will be enforced in that state if it is unambiguously

drafted.

 Whether the state distinguishes between "pay-if-paid" and "pay-when-paid"

provisions.

 Whether "pay-when-paid" clauses allow a contractor in the state to only delay payment

to its subcontractors for a reasonable time.

 Key statutes and cases that describe the states' positions on contingent payment

clauses.

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This publication is designed as a summary of the basic principles of state law, but is not

a comprehensive legal treatment of the law in the states. This publication does not contain

legal advice. Because individual circumstances may vary widely, and because state

laws are constantly changing, readers should consult their local attorneys for specific

advice.

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State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

Alabama (No

change)

 

Ala. Code 8-29-2: All contracts

between parties must specify a

date of payment.

Pay-when-paid clause in the

subcontract did not create a

condition precedent to payment,

but that it was merely a timing

mechanism for payment. The

parties did not "clearly indicat[e]

that the subcontractor assumed

the risk of nonpayment." Fed.

Ins. Co. v. I. Kruger, Inc., 829

So. 2d 732, 741 (Ala. 2002).

Alaska

 

Alaska Stat. § 36.90.210: A

General contractor must pay a

subcontractor within eight days

of being paid.

The pay-when-paid clause is

enforced as creating a valid

condition precedent to payment

for the subcontract. Industrial

Indem. Co. v. Wick Constr. Co.,

680 P.2d 1100 (Alaska 1984).

Arizona (No

Change)

 

"In order to create a condition

precedent [to the

subcontractor's payment], there

must be contractual language

demonstrating the parties'

unequivocal intent" that the

subcontractor will only be paid if

the contractor is paid. L. Harvey

Concrete v. Agro Constr. &

Supply Co., 189 Ariz. 178, 181

(Ariz. Ct. App. 1997).

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State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

Arkansas (no

change)

 

Ark. Code Ann. § 22-9-205:

Recognizes the enforceability of

a "pay-when-paid" provision in a

public contract. It does not

address whether a "pay-when-

paid" clause would create a

condition precedent to the

subcontractor's payment.

A condition that sets out events

to happen before payment may

be construed to link the

existence of the debt to

fulfillment of the conditions.

Brown v. Maryland Casualty

Co., 246 Ark. 1074, 1082 (Ark.

1969).

Clause that required payment

"immediately on the completion

of the work" established a valid

condition precedent to payment.

Manuel v. Campbell, 3 Ark. 324

(1841).

California (No

change)

If meets form

required under

Cal Civ Code

§§ 8122-8138.



Cal Civ Code §§ 8122-8138:

Statute preventing a waiver of

lien rights has been interpreted to

also prohibit "pay-if-paid"

provisions for the indirect effect

on lien rights, “unless and until

the claimant executes and

delivers a waiver and release

under this article.”

California courts will not enforce

"pay-if-paid" clauses as they

unlawfully inhibit subcontractor's

mechanic's lien rights. William

R. Clark Corp. v. Safeco Ins.

Co., 938 P.2d 372 (Cal. 1997).

Colorado (No

change)

 

Pay-if-paid provisions must

unequivocally express the

party's intent to establish a

condition precedent to payment

in order to be enforceable. "To

create a pay-if-paid clause in a

construction contract, the

relevant contract terms must

unequivocally state that the

subcontractor will be paid only if

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

the prime contractor is first paid

by the owner and that the

subcontractor bears the risk of

the owner’s non-payment. [A]

pay-when-paid clause. . . is an

unconditional promise by the

general contractor to pay its

subcontractor even if the owner

becomes insolvent." Main Elec.,

Ltd. v. Printz Servs. Corp., 980

P.2d 522 (Colo. 1999).

Connecticut

 

Conn. Gen. Stat. § 49-41a(d):

Contractor cannot withhold

payment from a subcontractor

because of a dispute with

another contractor,

subcontractor.

Contract language that specifies

payment shall be made to the

subcontractor at the time it is

made to the contractor

effectively establishes a valid

condition precedent to payment.

Star Contracting Corp. v.

Manway Constr. Co., 337 A.2d

669 (Conn. 1973).

Delaware (no

change)



Del. Code. Ann. tit. 6 § 3507 (e):

Makes void any clause in a

subcontract that makes payment

by the owner a condition

precedent to the subcontractor's

payment. This statute does not

apply to public contracts.

Chapter 35 only applies to the

construction of buildings, and

does not include all construction

projects like highways. VSI

Sales, LLC v. Griffin Sign, Inc.,

2014 U.S. Dist. LEXIS 57620.

District of

Columbia (no

change)

 

D.C. Code. § 27-134 provides

that “conditions of payment to

the subcontractor on receipt by

the contractor from the owner

may not abrogate or waive the

"Pay-when-paid" provision

established a valid condition

precedent. Subcontractor still

prevailed in claim for damages

as the court imposed a duty on

contractor to attempt to recover

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

right of the subcontractor to: (1)

Claim a mechanic’s lien; or (2)

Sue on a contractor’s bond.” Any

contract provision that attempts

to change the above rights is

void as against public policy.

payment, and contractor had

settled with owner without

accounting for the

subcontractor's entitlement.

Urban Masonry Corp. v. N&N

Contractors, Inc., 676 A.2d 26

(D.C. 1996).

Florida (no

change)

 

"Risk-shifting provisions are

susceptible to only two possible

interpretations. If a provision is

clear and unambiguous, it is

interpreted as setting a

condition precedent to the

general contractor's obligation

to pay. If a provision is

ambiguous, it is interpreted as

fixing a reasonable time for the

general contractor to pay. In

purported risk-shifting

provisions between a contractor

and subcontractor, the burden

of clear expression is on the

general contractor." DEC

Electric, Inc. v. Raphael Constr.

Corp., 558 So. 2d 427, 429 (Fla.

1990).

Georgia (No

Change)

 

“Under Georgia law, a condition

precedent to payment, such as

a clause that says the

subcontractor only receives its

money when the prime

contractor is itself paid, is not

simply a timing mechanism.

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

Rather, it will bar recovery by

the subcontractor until the

condition is met.” United States

ex rel. McKenney's, Inc. v. Gov't

Tech. Servs., LLC, 531 F.Supp.

2d 1375, 1378 (N.D. Ga. 2008)

(citing St. Paul Fire & Marine

Ins. Co. v. Ga. Interstate Elec.

Co., 187 Ga. App. 579 (Ga. Ct.

App. 1988)).

Hawaii (no

change)



HRS § 444-25: If payment is

contingent upon receipt of funds,

the contractor shall clearly state

this fact in the contractor's

solicitation of bids. This does not

apply to public contracts.

There are no cases from courts

regarding this statute, but the

language of the statute appears

to contemplate the enforcement

of a contingent payment clause.

Idaho (No

Change)

 

Contract terms setting the

timing of payment of

subcontractor after the payment

of the prime contractor create a

valid condition precedent. Hoff

Cos. v. Danner, 822 P.2d 558

(Idaho 1991).

Illinois

 

770 Ill. Comp. Stat. 60/21: "Any

provision in a contract,

agreement, or understanding,

when payment from a contractor

to a subcontractor or supplier is

conditioned upon receipt of the

payment from any other party

including a private or public

owner, shall not be a defense by

Pay-when-paid language may

establish a condition precedent

to payment if the intent of the

parties was to create such a

condition. Premier Elec. Constr.

Co. v. American Nat'l Bank of

Chicago, 658 N.E.2d 877 (Ill.

Ap. Ct. 1995).

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

the party responsible for

payment to a claim" if that party

is other than the contractor.

Indiana

 

Burns Ind. Code Ann. § 32-28-3-

18(c): “An obligor's receipt of

payment from a third person may

not:

(1) be a condition precedent to;

(2) limit; or

(3) be a defense to the provider's

right to record or foreclose a

lien against the real estate that

was improved by the provider's

labor, material, or equipment.”

The Indiana courts have not

squarely addressed pay-if-paid

clauses, but most jurisdictions

that have done so have

interpreted condition-precedent

language as sufficient to create

a pay-if-paid clause. See, e.g.,

Envirocorp Well Servs., Inc. v.

Camp Dresser & McKee, Inc.,

No. IP99-1575-C-T/G, 2000

U.S. Dist. LEXIS 16088, 2000

WL 1617840, at *5 (S.D. Ind.

Oct. 25, 2000) (explaining that

"[c]ourts that have enforced

[pay-if-paid] provisions do so

when the provisions explicitly

provide that payment to the

contractor by the owner is a

condition precedent to payment

to the subcontractor by the

contractor"). BMD Contrs., Inc

v. Fid. & Deposit Co. of Md.,

679 F.3d 643, 2012 U.S. App.

LEXIS 9558, 2012 WL 1660962

(7th Cir. Ind. 2012).

Iowa (No

change)

 

Clause setting a time for

payment after payment by the

owner establishes a

reasonable time for payment

by the contractor to the

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

subcontractor. Grady v. S.E.

Gustafson Constr. Co., 103

N.W.2d 737 (Iowa 1960).

Kansas (no

change)

 

Clause setting a time for

payment after payment by the

owner establishes a reasonable

time for payment by the

contractor to the subcontractor.

Shelley Electric, Inc. v. United

States Fidelity & Guaranty Co.,

1992 U.S. Dist. LEXIS 16978

(D. Kan. Oct. 16, 1992).

Kentucky (no

change)

 

Clause setting a time for

payment after payment by the

owner establishes a reasonable

time for payment by the

contractor to the subcontractor.

A. L. Pickens Co. v.

Youngstown Sheet & Tube Co.,

650 F.2d 118, 120 (6th Cir.

1981).

Louisiana

 

Pay when paid clause sets a

reasonable time for payment

and does not set a condition

precedent to payment of a

subcontractor. S. States

Masonry, Inc v. J.A. Jones

Constr. Co., 507 So. 2d 198

(La. 1987).

Properly worded "pay-if-paid"

clause will create a condition

precedent to the subcontractor's

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

payment. Imagine Constr., Inc.

v. Centex Landis Constr. Co.,

Inc., 707 So. 2d 500 (La. App.

1998).

Maine

 

Payments will be made in

accordance with the contract so

long as the contractor accurately

discloses the due date for

receipt of payment. 10 M.R.S.

§ 1114.

No cases concerning contingent

payment clauses.

Maryland

 

Md. REAL PROPERTY Code

Ann. § 9-113: Contingent

Payment clauses may not

“abrogate or waive the right to

(1) claim a mechanics’ lien; or

(2) sue on a contractor’s bond.”

In order to shift the risk of owner

non-payment to the

subcontractor, the subcontract

must have an express

unambiguous provision shifting

that risk. Gilbane Bldg. Co. v.

Brisk Waterproofing Co., 585

A.2d 248 (Md. 1991).

Massachusetts



ALM GL ch. 149, § 29E: On

private projects worth over

$3,000,000, unless work is

defective, pay-if-pay clauses are

unenforceable in all general and

subcontracts, except where (a)

the owner is insolvent and (b)

the party who wishes to invoke

pay-if-pay has filed a mechanic’s

lien before submitting its first

requisition and taken all steps

necessary to maintain that lien.

The Prompt Pay Act only

applies to private construction

projects. United States v.

Const. & Telcom. Servs., 2013

U.S. DIST. LEXIS 108829

(2013 D. Mass).

Michigan

 

Language specifying that

"receipt of such payments ...

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

being a condition precedent to

payments to the subcontractor"

enforced as a valid "pay-if-paid"

clause. Christman Co. v.

Anthony S. Brown Dev. Co.,

210 Mich. App. 416 (1995).

Minnesota (no

changes)

 

Minn. Stat. § 337.10 (3):

Provisions contained in, or

executed in connection with, a

building and construction

contract requiring a contractor,

subcontractor, or material

supplier to waive the right to a

mechanics lien or to a claim

against a payment bond before

the person has been paid for the

labor or materials or both that

the person furnished are void

and unenforceable.

Conditions precedent are not

favored in the law and a contract

that does not explicitly create a

condition precedent will be

construed to merely establish a

reasonable time for payment.

Mrozik Constr., Inc. v. Lovering

Assoc., Inc., 461 N.W.2d 49

(Minn. Ct. App. 1990).

Mississippi

 

”Pay-When-Paid” clauses will be

enforced and “grant the

contractor a reasonable time” to

pay the subcontractor.”

Lafayette Steel Erectors, Inc. v.

Roy Anderson Corp., 71

F.Supp. 2d 582 (S.D. Miss.

1997).

Missouri (no

change)

 

Mo. Rev. Stat. § 431.183: A “Pay

if Paid” clause is no defense to a

mechanic’s lien.

Even where the "pay if paid"

clause is itself unambiguous,

other seemingly contradictory

clauses in a contract can cause

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

A “Pay if Paid” clause may not

provide protection to general

contractors, as pre-payment

waivers of lien rights are void as

against public policy. Mo. Rev.

Stat. § 429.005.

the "pay if paid" clause to

merely establish a reasonable

time for payment. Meco Sys.,

Inc. v. Dancing Bear

Entertainment, 42 S.W.3d 794,

808 (Mo. Ct. App. 2001).

Montana (no

change)

Mont. Code Ann. § 28-2-2103

(2)(a): Within 7 days after a

contractor receives payment

from an owner, the contractor

shall pay the subcontractor.

Mont. Code Ann. § 28-2-723: "A

construction contract may not

contain provisions requiring a

[party] to waive the right to a

construction lien or ... payment

bond before the [party] has been

paid."

Montana courts have yet to

address this issue, but the

strongly written statutory

language is similar to that in

states, such as California, that

have found "pay-if-paid" clauses

unenforceable.

Nebraska (no

change)

 

Clause that does not

unambiguously create a

condition precedent for payment

merely establishes a

reasonable time for the

contractor to pay the

subcontractor. D. K. Meyer

Corp. v. Bevco, Inc., 292

N.W.2d 773 (Neb. 1980).

Nevada



The Nevada Supreme Court

interprets Nev. Rev. Stat. Ann.

§§ 624.624-624.626 as making

void any contractual provision

that conditions payment to a

“Lien waiver[s] and pay-if-paid

provisions were unenforceable

based upon Nevada's public

policy favoring the statutory

right to a mechanic's lien.”

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

subcontractor upon the receipt of

payment by the prime contractor.

Lehrer McGovern Bovis, Inc. v.

Bullock Insulation, Inc., 124

Nev. 1102 (Nev. 2008).

New

Hampshire

 

Courts require specific

language such as "if" or "on

condition that" to find that a

contract contains a condition

precedent. Holden Eng. and

Surveying Inc. v. Pembroke

Rd. Realty Trust, 137 N.H.

393 (1993).

Contractor cannot withhold

payment from subcontractor

where contractor fails to seek

approval of subcontractor's work

from architect. D.M. Holden, Inc.

v. Contractors' Crane Service,

Inc. 121 N.H. 831 (1981).

New Jersey

(no change)

 

Clause setting time for payment

to subcontractor after the

contractor received payment

merely establishes a reasonable

time for payment from the

contractor to the subcontractor.

Seal Title Corp. v. Ehret. Inc.,

589 F.Supp. 701 (D. N.J. 1984).

New Mexico

New Mexico would likely

support a condition prevedent to

payment. MidAmerica Constr.

Mgmt., Inc. v. MasTec N. Am.,

Inc., 436 F.3d 1257 (10th Cir.

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

2006) (applying New Mexico

law)

New York



NY General Obligations Law §5-

322.1: “Pay-if-Paid” clauses are

void as against the state’s public

policy protecting lien rights.

West- Fair Elec. Contractors v.

Aetna Cas. & Sur. Co., 661 N.

“Pay-if-Paid” clauses are void

as against the state’s public

policy protecting lien rights.

West-Fair Elec. Contractors v.

Aetna Cas. & Sur. Co., 661

N.E.2d 967 971 (1995).

NY Lien Law § 34: Any

contractual provision waiving a

subcontractor's right to a lien

against a property is void. The

Court of Appeals has interpreted

these provisions to void all "pay

if paid" clauses in subcontracts.

NY General Business Law

§ 757: Any provision in an

agreement in a private

construction contract (except

material supplier) that makes the

contract subject to the laws of a

state other than New York is void

and unenforceable.

“

Pay-if-Paid” clauses are void

as against the state’s public

policy protecting lien rights.

West-Fair Elec. Contractors v.

Aetna Cas. & Sur. Co., 661

N.E.2d 967, 971 (1995).

North Carolina

(no change)



N.C. Gen. Stat. § 22C-2:

"Payment by the owner to a

"Pay-when-paid" clauses, like

"pay-if-paid" clauses, are

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

contractor is not a condition

precedent for payment to a

subcontractor...and an

agreement to the contrary is

unenforceable."

N.C. Gen. Stat. § 22C-3: "The

contractor shall pay to his

subcontractor...within seven

days of receipt by the

contractor...of each periodic or

final payment."

unenforceable. Am. Nat'l Elec.

Corp. v. Poythress Commer.

Contrs., Inc., 167 N.C. App. 97,

101 (N.C. Ct. App. 2004).

North Dakota

(no change)

North Dakota courts have yet to

address contingent payment

clauses.

Ohio (no

change)

 

Ohio Rev. Code § 4113.62(E):

"Pay if paid" contract provisions

will not prevent the subcontractor

from filing a mechanic's lien.

“Pay-when-paid” clause of a

contract establishes a

reasonable time for payment

but does not set a condition

precedent for payment to a

subcontractor. Chapman

Excavating Co. v. Fortney &

Weygandt, Inc., 2004 Ohio

3867 (2004) (following the

rationale from Thom. J. Dyer

Co. v. Bishop International

Engineering Co., 303 F.2d 655

(6th Cir. 1962)).

“[T]he use of the term ‘condition

precedent’ in the payment

provision of a contract between

a general contractor and a

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

subcontractor” is essentially

magic language that on its own

“clearly and unequivocally

shows the intent of those

parties to transfer risk of the

project owner’s nonpayment

from the general contractor to

the subcontractor.” Transtar

Electric, Inc. v. A.E.M. Electric

Services Corp., Slip Opinion

No. 2014-Ohio-3095, at

syllabus #2.

Oklahoma (No

change)

 

Okla. Stat. tit. 61 § 224: "If a

subcontractor ... has performed

... the prime contractor shall

make payment to the

subcontractor ... no later than

ten (10) calendar days after the

prime contractor receives its

corresponding payment for the

work performed."

Clause setting the time for

payment of a subcontractor after

the contractor has received

payment does not create a

condition precedent to payment.

It merely establishes a

reasonable time for payment

from the contractor to the

subcontractor. Byler v. Great

American Ins. Co., 395 F.2d 273

(10th Cir. 1968) (applying

Oklahoma law).

Oregon (no

change)

 

Or. Rev. Stat. § 701.630: “the

original contractor shall pay the

subcontractor for that work no

later than seven days after the

original contractor receives the

payment.”

Any intention to shift the risk of

a construction project from the

contractor to the subcontractor

must be evidenced by

unambiguous language.

Language that appears only to

set a time for payment will not

be construed to establish a

condition precedent for

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

payment. Mignot v. Park Hill,

391 P2d 755 (Oregon 1964).

Pennsylvania

(no change)

 

Public Contracts:

62 Pa. Cons.

Stat. § 3933(c): The

subcontractor shall be paid “the

full or proportional amount

received for each

subcontractor’s work and

material … 14 days after receipt

of a progress payment.”

Private Contracts: 73 P.S.

§ 507(c). Time for Payment:

When they have performed in

accordance with their contract(s)

subcontractors (and sub-subs)

shall be paid “the full or

proportional amount received for

each subcontractor’s work or

materials… 14 days after receipt

of each progress or final

payment or 14 days after receipt

of the subcontractor’s invoice,

whichever is later.”

If the intent of the parties is

unambiguous, a “pay-if-paid”

clause will establish a condition

precedent to payment. C.M.

Eichenlaub Co. v. Fid. &

Deposit Co., 437 A.2d 965 (Pa.

Super. Ct. 1981).

Rhode Island

(no change)

The Rhode Island Supreme

Court has not ruled on this

issue.

South Carolina

(no change)



S.C. Code Ann. § 29-6-230:

Owner payment to the contractor

cannot be a condition precedent

to the subcontractor's payment.

Clause setting the time for

payment of a subcontractor

after the contractor has

received payment merely

establishes a reasonable time

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

for payment from the contractor

to the subcontractor. Elk &

Jacobs Drywall v. Town

Contractors, Inc., 229 S.E.2d

260 (1976).

South Dakota

(no change)

South Dakota courts have yet to

address contingent payment

clauses.

Tennessee (no

change)

 

Clause setting the time for

payment of a subcontractor after

the contractor has received

payment does not create a

condition precedent to payment.

It merely establishes a

reasonable time for payment

from the contractor to the

subcontractor. Koch v.

Construction Tech., 924 S.W.2d

68 (Tenn. 1996).

Texas (no

change)

 

Texas Business & Commerce

Code, § 56.001 et

seq. Principally, and subject to

exceptions based on the kind of

construction contracts, a

contingent payment clause: (1)

will not invalidate mechanic’s lien

rights; (2) is not enforceable if

the owner’s nonpayment is due

to the fault of the prime

contractor or one of its other

subs; and (3) is not enforceable

Clause reading "contractor will

pay [for work for which]

payment has been made by the

owner] does not establish a

condition precedent to payment.

Sheldon L. Pollack Corp. v.

Falcon Industries, Inc., 794

S.W.2d 380, 383 (Tex. App.

Corpus Christi 1990).

003708\000000\4812-5942-6475v1

State “Pay-if-

Paid”

Enforced if

Explicit

“Pay-when-

Paid” and

“Pay-if-

Paid”

Treated the

Same

“Pay-when-

Paid”

Suggests

Time for

Payment

Statutory Provisions Case Law

if enforcement would be

unconscionable.

Utah

 

Utah Code Ann. § 13-8-4 (3)(a):

“The existence of a contingent

payment contract is not a

defense to a claim to enforce a

preconstruction [service lien or

mechanics' lien filed] under Title

38,” Chapter 1, Mechanics'

Liens.

Pay-when-paid provisions do

not create conditions precedent

to the payment of

subcontractors. Zions First Nat'l

Bank v. Christiansen Bros., Inc.,

66 F.3d 1560 (10th Cir. 1995).