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Construction contractor’s obligation to pay subcontractors

On Behalf of | May 2, 2014 | Business Construction Law

Generally, it’s safe to assume when someone does work on a construction project, that person will expect to be paid. How soon that obligation to pay arises, however, is likely determined by the contract between the parties. In some cases, when it comes to a prime contractor paying its subcontractors, that obligation might never arise.

If you’re hiring subcontractors to help complete a project, you should contact a construction contract attorney that can help you to draft favorable payment clauses.

Most contracts contain clauses that modify the general concept of paying a worker when the work is done. For example, some contracts between a prime and subcontractor provide that the prime is only obligated to pay its subcontractors if the owner of the project pays the prime contractor. This not only delays the prime contractor’s obligation to pay its subs, but also eliminates that obligation if the owner never pays the prime contractor.

Similarly, some contracts contain a clause that obligates the prime to pay its subs when the owner of the project pays the prime. Unlike the “pay-if-paid” clause above, these “pay-when-paid” clauses may create an expectation that the subcontractor will be paid after a reasonable time, regardless of whether or not the owner pays the prime.

Of course, as with other contract terms, if the payment clause is too ambiguous or unclear it may be difficult to enforce. You should always contact an attorney familiar with the nuances of construction contract law in order to ensure the clauses you intend to include are fully enforceable.