The party seeking to enforce a pay of paid clause should verify that other provisions of the subcontract, and the prime contract, do not conflict with the pay if paid provision.
The first step for drafting an enforceable pay if paid clause is to confirm that the state where the project is located enforces pay if paid clauses; then make sure the provision is clear and unambiguous with respect to the party’s intent. Drafting an enforceable pay if paid provision must be clear and unambiguous, and it should expressly state that payment by the owner is a condition precedent to contractor’s duty to pay subcontractor.; it should include other conditions precedents, such as owner and architect’s acceptance of the subcontractors work; and it should expressly state that the subcontractor assumes the risk of the owner’s nonpayment. This video provides an example of pay if paid and pay when paid provisions.
Scott D. Cahalan
Smith, Gambrell & Russell, LLP
- Partner in the construction law 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
- Can be contacted at [email protected], [email protected], or 404-815-3711
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