Today, we’ll talk a bit about common payment conditions and pay-if-paid clauses.
A. Payment Conditions
This is a fairly big deal, in much the same way that breathing is a fairly big deal (if breathing is not a fairly big deal to you, put down the mouse and walk toward the light...).
Most contract agreements have a few little details about payment, requiring that the payee do a lot of things before the payor pays. Common things included are: 1) invoicing for the work, 2) providing conditional and/or unconditional releases, 3) providing certified payroll, 4) providing look-ahead schedules, 5) providing approvals and certifications, 6) providing proof of licensure, 7) providing insurance certificates, 8) providing warranties, 9) providing a complete body scan and a detailed description of every cell in the contractor’s body.
Okay, this last is a bit much. But the point is to highlight the fact that there are a lot of things that may be required before the lower-tier contractor gets its money. And failing to do them will often result in the money getting paid late or not getting paid at all, resulting in having to hire me (or someone like me but less handsome) to get your dough. Better to go through the contract with a highlighter, mark down what you need to do ahead of time, and then see that it gets done throughout the course of the project.
B. Pay-if-paid clauses
The “pay-if-paid” clause is a common clause in many construction agreements which specifies that the lower-tier contractor will not be due any money (meaning he won’t be paid) by the higher-tier contractor unless and until the higher-tier contractor gets paid by the owner (or whoever is above the higher-tier contractor). Or, in diagrammatical terms:
Owner pays
Contractor,
who then (and only then) pays
Subcontractor
If the owner doesn’t pay, then the diagram looks like this:
Owner doesn’t pay
Contractor,
who then refuses to pay
Subcontractor,
who is now looking at 5-10 for
justifiable homicide of Contractor
As I said, this is one of the great hallmarks of construction agreements.
It’s also just about completely unenforceable in California. This clause can almost always be disregarded, because the courts have said it is “against public policy,” so this contract clause will most likely get ignored if it comes before a court, in much the same way that I will be ignored when I ask my son to clean his room. However, be aware of these clauses nonetheless, because if it’s in there, you’re likely to have to deal with it sooner or later. Better to point out that it’s unenforceable from the beginning, and see if you can just get it taken out of the subcontract, rather than having to argue about it later.
A. Payment Conditions
This is a fairly big deal, in much the same way that breathing is a fairly big deal (if breathing is not a fairly big deal to you, put down the mouse and walk toward the light...).
Most contract agreements have a few little details about payment, requiring that the payee do a lot of things before the payor pays. Common things included are: 1) invoicing for the work, 2) providing conditional and/or unconditional releases, 3) providing certified payroll, 4) providing look-ahead schedules, 5) providing approvals and certifications, 6) providing proof of licensure, 7) providing insurance certificates, 8) providing warranties, 9) providing a complete body scan and a detailed description of every cell in the contractor’s body.
Okay, this last is a bit much. But the point is to highlight the fact that there are a lot of things that may be required before the lower-tier contractor gets its money. And failing to do them will often result in the money getting paid late or not getting paid at all, resulting in having to hire me (or someone like me but less handsome) to get your dough. Better to go through the contract with a highlighter, mark down what you need to do ahead of time, and then see that it gets done throughout the course of the project.
B. Pay-if-paid clauses
The “pay-if-paid” clause is a common clause in many construction agreements which specifies that the lower-tier contractor will not be due any money (meaning he won’t be paid) by the higher-tier contractor unless and until the higher-tier contractor gets paid by the owner (or whoever is above the higher-tier contractor). Or, in diagrammatical terms:
Owner pays
Contractor,
who then (and only then) pays
Subcontractor
If the owner doesn’t pay, then the diagram looks like this:
Owner doesn’t pay
Contractor,
who then refuses to pay
Subcontractor,
who is now looking at 5-10 for
justifiable homicide of Contractor
As I said, this is one of the great hallmarks of construction agreements.
It’s also just about completely unenforceable in California. This clause can almost always be disregarded, because the courts have said it is “against public policy,” so this contract clause will most likely get ignored if it comes before a court, in much the same way that I will be ignored when I ask my son to clean his room. However, be aware of these clauses nonetheless, because if it’s in there, you’re likely to have to deal with it sooner or later. Better to point out that it’s unenforceable from the beginning, and see if you can just get it taken out of the subcontract, rather than having to argue about it later.
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