Pay-if-Paid Versus Pay-When-Paid: Reading a New York Subcontract

Reviewed September 7, 2026.

The phrases “pay-if-paid” and “pay-when-paid” are often used loosely. Read the operative language: does it merely set a payment schedule, or does it make the subcontractor absorb the owner's failure to pay?

New York courts reject payment conditions that improperly shift that risk and defeat lien rights. A valid timing provision presents a different question. In CNP Mechanical, Inc. v. Allied Builders, Inc., 84 AD3d 1748 (2011), the court used the agreement's valid timing clause to determine when interest on specified change work began. That decision does not authorize indefinite nonpayment.

Review the whole payment process

Compare the subcontract with incorporated documents, approved change orders, invoice certifications and payment records. Establish whether payment has become due, which amounts are disputed and what supporting information is missing. A clause that looks like a timing term can still function as an impermissible transfer of risk.

For covered private projects, also check the Prompt Payment Act's project definition and exclusions and its nonwaivable protections. Do not rely on an old contract date or a foreign-law clause as a general escape from New York law. Seek review of the particular agreement and preserve all claim deadlines while payment discussions continue.

Kushnick Pallaci PLLC assists clients throughout New York with subcontract drafting and review. Contact 631-752-7100 or vtp@kushnicklaw.com.

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