A pay if paid clause must be clear and unambiguous to be enforceable.
There are various legal theories that can be used to defeat or defend a pay if paid clause. Defenses to a pay if paid clause includes: ambiguity, public policy, settlement, implied duty of good faith and fair dealing, payment bonds, prevention doctrine, and unjust enrichment. Because it’s considered an avoidance clause, a subcontractor can defeat a pay if paid clause in most states by showing that there two or more reasonable and logical interpretations of the pay if paid language. This does not require a showing that the subcontractor’s interpretation is the most reasonable or most logical. This video reviews the different defenses to a pay if paid clause and enforceability of conditional payment provisions in the U.S.
Scott D. Cahalan
Smith, Gambrell & Russell, LLP
- Partner in the construction law and litigation section of Smith, Gambrell and Russell, LLP, an AmLaw 200 firm
- Part-time instructor of graduate courses in Design and Construction Law and Real Estate Development Law at the Georgia Institute of Technology
- General counsel to the Georgia Utility Contractor’s Association
- Practice includes all aspects of design and construction law from drafting and negotiating prime contractors, subcontracts, and purchase orders to mediating, arbitrating, and litigating construction disputes
- Drafted form construction contracts for the Associated Owners and Developers, a national organization
- Recognized by Chambers USA, The Best Lawyers in America, and Georgia Super Lawyers
- Frequent author and lecturer on construction law
- Member of the State Bar of Georgia, Northern District of Georgia, and 11th Circuit Court of Appeals
- J.D. degree, with honors, University of Georgia; B.S. degree in construction engineering, Iowa State University
- Contact information [email protected], [email protected], or (404) 815-3711
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