Risks regarding con- tingent payment and no compensation for delay clauses “When” and “If” payment and “no damage for delay” verbiage can result in very different payment outcomes sponsored by BUSINESS TIP “Contingent payment” and “no compensation for delay clauses” can be very damaging to a sub- contractor who is unaware they exist within the subcontract. It’s important to read these claus- es carefully, determine what is enforceable, and lobby hard not to sign these inequitable clauses. Let’s start with defining the two types of contingent payment clauses: paid-when-paid and paid-if-paid. While both of these clauses are contingent upon pay- ment from the owner, they have a very different meanings. Simply put, a “paid-when-paid clause” states, “I will pay you after the owner pays me,” but does not relieve the contractor from the contractual obligation of payment. A “paid-if-paid clause” states, “I will make payment only if the owner pays me“ and attempts to relieve the contractor from the obligation of payment. In most states, the statutes permit a “paid-when-paid” clause, allow- ing the contractor a reasonable time to resolve differences with the owner and obtain payment, prior to paying the subcontrac- tors. What we should be looking for when reviewing these clause are terms relieving the contractor from the contractual obligation of payment if he is not paid. When a payment provision states the con- tractor and subcontractor share the risk of owner payment – or if the contractor is not paid he has no obligation to make pay- ment – it becomes a “paid-IF-paid clause.” The statutes regarding paid- when-paid and paid-if-paid vary by state. The American Subcontractors Association pub- lished a very informative docu- ment titled, “Contingent Payment Clauses in the 50 States.” Although it is a 2014 edition, it By Ron Meler, RW Meler Consulting 28 TileLetter | October 2018