Pay-When-Paid / Pay-If-Paid Risk Checker in Texas Construction Contracts
'Pay-if-paid' shifts the risk of owner non-payment entirely onto the subcontractor. 'Pay-when-paid' merely delays timing. Confusing the two can cost you the entire subcontract value.
Pay-if-paid enforceable only if 'conspicuous' and clearly a condition precedent.
Texas Business & Commerce Code §56.051 (limits pay-if-paid) and Texas case law
Typical exposure per project when a PWP / PIP clause slips into a signed contract.
In Texas, ambiguous pay-if-paid language is treated as pay-when-paid (a timing clause), not a shift of risk.
If the Texas subcontract doesn't clearly use 'condition precedent' language, courts default to reasonable-time payment.
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The clause we flag — and the one we help you write instead.
“Contractor's receipt of payment from Owner is a condition precedent to Contractor's obligation to pay Subcontractor, and Subcontractor assumes the risk of Owner's non-payment.”
“Contractor shall pay Subcontractor within seven (7) days of Contractor's receipt of the corresponding payment from Owner, provided that in no event shall payment be delayed more than sixty (60) days from Subcontractor's approved application for payment. This clause governs timing only and is not a condition precedent to payment.”
- 1Look for the phrase 'condition precedent' — this is the pay-if-paid trigger.
- 2Insist on a hard outside date (e.g., 60 or 90 days) regardless of Owner payment.
- 3In many states, pay-if-paid clauses must be conspicuous and unambiguous to be enforceable.
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