The clause governs timing rather than entitlement, requiring payment within a reasonable time even if the owner never pays. It contrasts with pay-if-paid, which makes owner payment a condition precedent.
Ambiguous clauses are construed as pay-when-paid.
Alternative Names:
Pay When Paid|Timing Payment Clause
Why it Matters?
Ambiguity resolution favors subcontractors, since courts construe unclear language as pay-when-paid rather than as a condition precedent, meaning the contractor must eventually pay regardless of owner nonpayment. What constitutes a reasonable time is then the dispute, and courts have found periods of several months reasonable in some circumstances. The clause provides cash flow relief without shifting the ultimate credit risk.
Frequently Confused with
Related terms
Frequently asked questions
How is ambiguous language construed?
What is the resulting dispute?
