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What Difference Does It Make? Pay If Paid vs. Pay When Paid When does a subcontractor get paid for its work? Not surprisingly, this is one of the enduring major issues in subcontract agreements. The traditional provision is exemplified by AIA Document A401: "The Contractor shall pay the Subcontractor each progress payment no later than seven working days after the Contractor receives payment from the Owner."
If taken literally, this language would mean that if the contractor never gets paid by the owner, then the contractor is never required to pay the subcontractor. With rare unanimity, every state that has considered the issue in a reported decision currently has come to the conclusion that it should not be construed in that way. Rather, the courts say, this type of clause is intended to cover the timing of payment in the normal course, but if the contractor does not receive payment from the owner in the normal course, or within a reasonable time thereafter, the contractor remains obligated to pay the subcontractor the amount otherwise due. Thus, the clause is construed to apply only to the timing of payment and has come to be known as a "pay when paid" clause. » continue reading |
Ohio's Prompt Payment Act Revisited | ![](./Construction Insight_ February 2015_files/a94ed205-0733-4409-bc03-f168559c2b02.jpg)
Lowell T. Woods (937) 641-1728 |
Leverage is typically a critical element in any construction dispute, and parties should strategically use all available tools at their disposal to enhance their position when conflicts arise. Ohio's Prompt Payment Act (the "Act"), Ohio Revised Code § 4113.61, represents one such tool. The Act expands the remedies available to subcontractors and material suppliers for non-payment under certain circumstances, subject, however, to important defenses. When properly asserted, the Act is designed to create a strong incentive for general contractors and other upper tier parties to make timely payments due to all lower tier subcontractors, laborers and suppliers. Given the potential ramifications, it is very important for all parties involved in a payment dispute to understand the scope, benefits and risks associated with claims under the Act. » continue reading |
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