Paid-If-Paid
The sub gets paid only if the owner actually pays the GC.
What it means
A paid-if-paid clause makes the owner's payment to the general contractor a strict condition of the GC's duty to pay the subcontractor — if the owner never pays, the sub is never owed. It shifts the risk of owner nonpayment down the chain, and explicit language like 'condition precedent' is what distinguishes it from the softer paid-when-paid clause. Courts in some states refuse to enforce paid-if-paid clauses or read them narrowly; treatment varies by state.
Why it matters before you sign
Under a true paid-if-paid clause, you can perform perfectly and still never be owed — look for the words 'condition precedent' before signing, and price the owner's credit risk accordingly.
In a contract, it looks like this
The subcontract stated that owner payment was a condition precedent to any payment obligation — a paid-if-paid arrangement.
This definition is a general, educational explanation — not legal advice. XOsign provides AI-assisted document tools and does not provide legal advice; consider consulting a qualified attorney for guidance on your specific situation. Requirements vary by state.
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