The Beneficiaries of ‘Pay-if-Paid’ Clauses in Construction Contracts
In construction law, general contractors have largely negotiated a shift in the distribution of risk away from the general contractor and to the subcontractor with the inclusion of “pay-if-paid” contractual clauses,” writes Dana Chaaban in Shutts & Bowen’s Construction Law Blog.
Writing for the Florida firm, Chaaban explains that such clauses make the general contractor’s receipt of payment from the owner a condition precedent to the general contractor’s ultimate payment to the subcontractors. Absent such a provision, general contractors bear the risk of an owner’s potential insolvency.
Subcontractors have sought to circumvent contractual “pay-if-paid” provisions by bringing claims against both the general contractors and their sureties who may guarantee payment.
Chaaban discusses some cases on the subject.
