Contracts & ExecutionQuestion 853 of 1605
A 'pay-if-paid' clause in a subcontract attempts to make the general contractor's receipt of payment from the owner a:
a.Condition precedent to the general's obligation to pay the subcontractor
b.Requirement that the sub perform without a contract
c.Guarantee that the sub is paid within 24 hours
d.Waiver of the sub's mechanics lien only
Explanation
A pay-if-paid clause seeks to make the owner's payment to the general contractor a condition precedent to the general's duty to pay the subcontractor, so that if the owner never pays, the general arguably owes the sub nothing. Such clauses are strictly construed and, in some jurisdictions and circumstances, limited by law or public policy. It is not a 24-hour payment guarantee, is not merely a lien waiver, and does not eliminate the need for a subcontract.
Practice all 1605 questions free — no signup required.
Related questions on this topic
- Under California Contractors State License Law, an unlicensed person who performs work requiring a license generally faces which severe contract-related consequence?
- A properly licensed contractor completes a commercial tenant improvement and is not paid. The contractor's ability to sue for the unpaid balance is generally supported because:
- A 'condition precedent' in a contract is:
- The 'implied covenant of good faith and fair dealing' that accompanies most contracts requires that:
- A bilateral contract is distinguished from a unilateral contract in that a bilateral contract involves:
- A homeowner tells a contractor, 'I'll pay you $1,000 if and when you finish removing the fallen tree,' and the contractor completes the removal. This is an example of acceptance of:
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)