Pay-when-paid and pay-if-paid

Pay-when-paid and pay-if-paid are subcontract clauses that link the subcontractor's payment to the general contractor's receipt of payment from the owner. A pay-when-paid clause is generally read as a timing provision: the sub is paid within a reasonable time after the prime is paid, but the prime still owes the money. A pay-if-paid clause makes owner payment a condition of the sub's right to be paid at all, shifting the risk of owner non-payment to the sub.

Courts and legislatures treat these clauses differently from state to state; some states limit or void pay-if-paid language. On federal work, the prime's payment obligations to subs are also shaped by prompt-payment rules. Read the exact wording before signing.