On a private construction project, a direct contractor wants to enforce a 'pay-when-paid' clause to delay payment to a subcontractor by 90 days while waiting for the owner to pay. Under California prompt-payment law, this clause is generally:

Explanation

California courts read a 'pay-when-paid' clause as fixing a reasonable TIME for payment, not as a condition precedent. Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882 held a true 'pay-if-paid' clause unenforceable because it waives the subcontractor's constitutionally protected mechanics lien remedy. So the prime still owes the sub under B&P §7108.5 (within 7 days of receiving a progress payment) and Civil Code §8814 (within 10 days of receiving retention), with a 2-percent-per-month penalty on amounts wrongfully withheld. (b) is the pay-if-paid reading Clarke rejected. (c) invents a public/private split; §7108.5(e) applies to all private works AND all public works except those under Public Contract Code §10262. (d) overstates: the clause is not void, and §7108.5(a) expressly lets the parties agree in writing to a different progress-payment interval. What they cannot do is move the owner's insolvency onto the sub.