Pay When Paid Clauses: Sword And Shield

Law360, New York (April 23, 2010, 1:05 PM EDT) -- "Pay When Paid" clauses in construction contracts are used as both a sword and a shield. If a general contractor fails to pay a subcontractor after it gets paid, the general contractor can be liable for interest and attorneys' fees to the subcontractor. This "sword" is used to force prompt payment. As illustrated in the case summary below — the clause is also a powerful "shield" for the contractor who does not get paid by the owner and faces multiple lawsuits from subcontractors.

On Feb. 19,...
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