Pay-When-Paid Provisions Still Unenforceable in New York State

Although the Prompt Payment Act ("PPA") of New York State offers a potential solution to the illegal pay-when-paid clauses found in many construction contracts

A recent ruling from the State's Appellate Division has narrowed, if not closed, that gap.

In the construction industry, "pay-when-paid" or "pay-if-paid"1 clauses are frequently included in a general contractor's contracts with subcontractors.

These clauses essentially allow the general contractor to defer paying its subcontractors for their work until it receives payment from the owner

In 1995, New York State's highest court prohibited this practise by ruling that pay-when-paid clauses are illegal 

Contractors still insert pay-when-paid clauses in contracts despite the ruling in West-Fair


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