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How To Convert the ConsensusDOCS Subcontract Into A Pay-If-Paid Agreement

Some Contractors want to share the risk of Owner payment with their Subcontractors.  As such, they often look to include a “pay-if-paid” clause in their contract with the Subcontractor.  Some AGC members believe that a pay-if-paid clause equitably shares the risk of Owner non-payment, while other specialty members view such provisions as unreasonably withholding payment to Subcontractors. The relevant ConsensusDOCS 750 (Contract between Contractor and Subcontractor) payment provision is located in Section 8.2.5.  This section contains a contingent payment provision to the Subcontractor such that payment is due from the Contractor to the Subcontractor within seven days of Owner‘s payment to Contractor.  This section mirrors the common law of most states in that it provides for payment to the Subcontractor within a reasonable time if, through no fault of the Subcontractor, the Owner fails to timely pay the Contractor. IMPORTANT NOTE:  Contractors should check applicable law carefully before modifying this section as a pay-if-paid clause shifting the risk of receiving payment to the Subcontractor may not be fully enforceable in all jurisdictions.  That being said, the ConsensusDOCS 750 can be modified to incorporate a pay-if-paid clause by adding the following to the beginning of Section 8.2.5: Receipt of payment by the Contractor from the Owner for the Subcontract Work is a condition precedent to payment by the Contractor to the Subcontractor.  The Subcontractor hereby acknowledges that it relies on the credit of the Owner, not the Contractor for payment of Subcontract Work. All AGC members receive a 20 percent discount on all ConsensusDOCS products.  Purchase at www.ConsensusDOCS.org and use Partner Code “AGC” and Promotion Code “100” when prompted during the check-out process. For additional information on ConsensusDOCS, please contact Maggie Jaus at (703) 837-5408 or jausm@agc.org.