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Payment Provisions 101 - Michelle Schaap

December 2014

Construction Today

Wolff & Samson member Michelle Schaap, authored a Construction Today article titled "Payment Provisions 101." The article, which was published in their November/December 2014 issue, emphasizes the importance of negotiating payment provisions between a construction contractor and subcontractor. The construction industry has two different types of payment provisions: "pay when paid" and "pay if paid." "Pay when paid" clauses specifically state a reasonable time frame that the subcontractor must be paid. "Pay if paid" clauses state that payment to a subcontractor depends on the contractor receiving payment from the owner. Many contractors prefer "pay if paid" clauses so they can shift the risk of owner's non-payment to subcontractors. Michelle said, "Even with subcontractors who unwittingly or willingly accepted even a clearly crafted 'pay if paid' clause, there is the possibility of recovering payment from a contractor 'within a reasonable time frame' even if the owner has failed to render payment. Subcontractors can press to limit when such clauses will apply. Considering these factors while negotiating the payment provision in your contract, can go a long way to protect yourself and your project against an owner's non-payment."

To read the full article, please visit the Construction Today's website.