Pay-When-Paid
A contract clause where the general contractor pays subcontractors only after receiving payment from the owner.
Definition
Pay-when-paid is a construction contract provision stating that the general contractor's obligation to pay a subcontractor is triggered by the GC receiving payment from the project owner. It is a timing mechanism for payment, as distinguished from pay-if-paid, which conditions payment on owner payment.
Why It Matters
Pay-when-paid clauses affect cash flow planning for both GCs and subcontractors. AP teams must track owner payment status to determine when subcontractor payments are due.
Examples
Standard pay-when-paid
Sub submits invoice on January 1. GC submits to owner January 5. Owner pays GC February 15. GC pays sub within 7 days per contract.
Owner payment delay
Owner delays payment 60 days. GC holds sub payment per pay-when-paid clause but must pay within reasonable time under state law.
How Nexus AP Helps
Nexus AP tracks owner payment status and automatically releases held subcontractor payments when owner funds are received.
Start Free TrialFrequently Asked Questions
What is the difference between pay-when-paid and pay-if-paid?
Pay-when-paid is a timing mechanism—payment is due within a reasonable time. Pay-if-paid makes owner payment a condition—if the owner never pays, the sub may not get paid. Enforceability varies by state.
Is pay-when-paid enforceable?
Generally yes, as a reasonable timing mechanism. However, most states require payment within a reasonable period regardless, typically 30-60 days.
Category
constructionRelated Terms
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