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Image courtesy of Flickr (Licensed) by © Steve Greaves.

One of the most important aspects of any agreement is the scope of work to be performed.  All too often disputes arise between general contractors and their subcontractors concerning the scope of the subcontractor’s responsibilities after work has begun.

It is not difficult to imagine a scenario where the project work has begun and the superintendent begins directing the performance of work that was never contemplated by the subcontractor.  Even worse, is when the subcontractor specifically excluded from its bid the work now been ordered.  How does this all too common dispute arise?

The question of who wins this battle is answered by
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Licensed Image from Bulkimport/Photodisc/Thinkstock
Licensed Image from Bulkimport/Photodisc/Thinkstock

Who bears the risk when an owner refuses to pay the general contractor or experiences financial failure?  More than likely, the subcontractors whose agreements include a contingent payment clause.  Two types of payment clauses exist and both are enforceable.  “Pay-when-Paid” clauses and “Pay-if-Paid.”  Pay-when-paid clauses allow the general contractor to wait a reasonable time for the owner to pay before paying the subcontractor.  Pay-if-paid clauses shift the risk of non-payment completely to the subcontractor.  Stated another way, a pay-if-paid clause makes the general contractor’s duty to pay the subcontractor absolutely conditional upon receiving the owner’s payment. 
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