DGAA bLAWg

Why Construction Subcontractors Should Avoid “Pay When Paid” Contracts

Web Admin - Thursday, February 28, 2019
Rolling Meadows civil litigation attorney breach of contractAs a construction subcontractor, you need to be careful about how your contracts are written, or you could expose yourself to substantial risk of non-payment. One particular clause to watch out for when signing a subcontractor construction contract is the clause which specifies the circumstances of payment, also known as a payment contingency clause. This provision may take the form of either “pay when paid” or “pay if paid,” and there is a meaningful legal difference between the two.

What Is a “Pay When Paid” Clause in a Construction Contract?


It is a generally accepted practice in the construction industry that a subcontractor gets paid only after the general contractor gets paid by the property developer. If a project developer fails to pay the general contractor on time or at all, the subcontractor is also at risk of being paid late or not at all, depending on how their contract is written.

Most state courts, including Illinois, have ruled that a “pay when paid” clause does not excuse the general contractor from paying subs in the event that the property developer does not pay the general contractor. Rather, a “pay when paid” clause may be interpreted as merely specifying an approach for the timing of payments, i.e., the number of days between the time when the general contractor receives payment from the property developer and distributes payments to subcontractors.

In contrast, a “pay if paid” clause is interpreted by the courts as meaning that subcontractors will not be paid unless and until the general contractor is paid by the property developer. This shifts the risk of non-payment from the general contractor to the subcontractor. As long as the contract language is precisely written and makes it clear that the subcontractor accepts the risk that they will not be paid if the general contractor is not paid, the courts will enforce a “pay if paid” clause. If there is any ambiguity, the courts could order payment to a subcontractor even if the general contractor is not paid.

Why Should Construction Subcontractors Object to “Pay If Paid” and “Pay When Paid” Contracts?


Because the general contractor controls access to the work, they often have the leverage to demand that subcontractors accept contingent payment clauses in their contracts. However, if you are a subcontractor, it is not in your best interests to accept a “pay if paid” or “pay when paid” clause in your contracts. You are legally obligated to pay for all of your equipment and labor expenses, so you need to protect your right to be paid by the general contractor in a timely manner. 

Because they are in direct contact with the property developer, the general contractor has a greater ability than a subcontractor to assess the property developer’s finances and ability to pay. Therefore, it is only right that the general contractor should bear the risk of late payment or non-payment by the developer.

Contingent payment clauses can make it harder for you to obtain payment if the property developer breaches their contract with the general contractor. Because your contract is with the general contractor, you have no standing to sue the property developer for failure to pay. Your only recourse is typically to secure a mechanic’s lien against the property developer. The Illinois mechanic’s lien act, 770 ILCS 60/21(e), specifically protects your right as a subcontractor to file a lien even if your contract with the general contractor has a payment contingency clause. 

Consult a Palatine Construction Contracts Lawyer


It is far more cost-effective in the long run to have a lawyer review your contracts before you sign them rather than to sue someone for breach of contract after a deal goes bad or to go after money owed to you by obtaining a mechanic’s lien. Call an experienced Arlington Heights civil litigation attorney at 847-934-6000 for a free initial consultation about your current legal needs. At Drost, Gilbert, Andrew & Apicella, LLC, we have the experience in both contract law and real estate law to support a wide range of legal needs for real estate developers and construction companies. 

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://www.constructconnect.com/blog/construction-law/legally-speaking-construction-contracts-pay-if-paid-pay-when-paid-clauses/
http://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=077000600K21
https://www.natlawreview.com/article/construction-group-news-extremely-clear-pay-if-paid-clause-enforced

Illinois Contract Law and the Statute of Limitations

Web Admin - Thursday, March 27, 2014

illinois breach of contract attorneyLawsuits are based around some sort of legal claim, an event or controversy where someone was harmed. For contracts this harm is usually comes in the form of a breach, where one party fails to fulfill its obligations. However, people are not allowed to simply lie in wait indefinitely after a breach of contract and file a suit decades later. Instead, the law imposes a rule called a statute of limitations. This rule acts as a time limit on filing a case, though the time limit varies based on the particular circumstances of the case.

After learning about statutes of limitations, many people wonder why they exist.

Intuitively, it seems unfair that an injured party should have a countdown placed on their ability to seek compensation. In reality there are two reasons for it, fairness to the defendant and the accuracy of the trial. From the standpoint of fairness, the law believes that even if someone has done something wrong, they still have the right to deal with it in open court and then put it behind them, rather than having the threat of a lawsuit hanging over them for the rest of their life.

As for the accuracy of the trial, evidence often degrades over time. Crucial objects can be lost, and witnesses’ recollections of events can grow hazy. Consequently, courts want plaintiffs bringing cases swiftly in order to have the best information available.

How Long is the Statute of Limitations for Breach of Contract?

For the purposes of contract law the statute of limitations can be as long 10 years or as short as one depending on what type of contract it is. The longest time limit, 10 years, belongs to breaches of standard written contracts. However, if the contract breached was an oral one rather than a written one, then Illinois law brings the statute of limitations down from 10 years to five. Certain sales contracts can have even shorter limits, four years by default, but the terms of the contract can opt to limit it to as little as one year.

In addition to the question of how long the statute of limitations is, the other major concern is the question of when the clock starts to count down. The general rule is that the time limit starts running from the moment of the breach, not the moment that the breach causes the injury. However, there is an exception to this normal starting point if something called the Discovery Rule applies.

The Discovery Rule "tolls" the statute of limitations, meaning that it prevents the time from counting down, until the injured party either discovers the breach or should have reasonably discovered the breach. Importantly, the Discovery Rule does not function for all breach of contract claims in Illinois, so whether it applies will depend on the specific facts of a case. There are also other rules that can toll the statute under certain circumstances such as if the injured party is a minor or away on military service.

If you believe you have a claim against someone for breaching a contract, contact a Palatine civil litigation attorney before the statute of limitations on your claim expires. Our experienced lawyers help clients across northwest suburban Cook County, in towns like Barrington, Des Plaines, and Crystal Lake.

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.


Recent Posts


Tags

Barrington estate planning lawyer estate planning, digital assets, Revised Uniform Fiduciary Access to Digital Assets Act, Illinois digital assets, Illinois estate planning, Rolling Meadows corporate lawyer Schaumburg insurance lawyers construction accidents drug crime distracted driving accidents Jay Andrew Long Grove real estate attorney Transfer on Death Instrument Barrington employment law attorney TBI Riverwoods estate planning lawyer life insurance lawyer spinal cord injury BAC real estate closing Des Plaines claims law firm Long Grove real estate lawyer estate planning attorney Deer Park real estate law firm Rolling Meadows accident lawyer Illinois insurance claim dispute lawyer gift tax exemption, estate planning, estate planning strategies, Illinois estate planning, South Barrington estate planning attorneys Illinois personal injury lawyers institutional trustee Illinois law Inverness real estate lawyer Barrington Illinois estate planning lawyer Palatine traffic lawyer employee misclassification drugs Schaumburg car accident attorney Arlington Heights medical malpractice lawyer Chicago attorney Chicago car accident lawyer independent contractor Crystal Lake personal injury attorney child safety Barrington boating accident attorney Crystal Lake estate planning lawyer Illinois workplace discrimination attorney Des Plaines real estate attorney criminal jet ski accidents real estate attorneys Rolling Meadows personal injury lawyers Illinois insurance disputes Schaumburg elder law lawyer car collision Palatine civil litigation lawyer Illinois attorney trusts Landlord Tenant Ordinance jet ski Arlington Heights accident attorney mass shooting Illinois traffic attorneys Chicago will attorney, social media platforms, Illinois estate planning lawyer, Illinois Smoke Detector Act Rolling Meadows insurance dispute lawyers liens Deer Park workers compensation lawyer Rolling Meadows car accident lawyers Illinois bicycle safety Barrington medical malpractice lawyers Crystal Lake personal injury lawyer employment attorney workplace sexual harassment personal injury accidents traffic offenses Illinois LLC creation rollover car crashes Retaliatory Discharge Crystal Lake accident attorney Crystal Lake pedestrian accident lawyer Colin H. Gilbert Buffalo Grove employment lawyer traffic laws Schaumburg estate planning lawyer Illinois construction accident attorney Rolling Meadows insurance lawyer Illinois boating accident lawyer car crashes living trust cell phone accidents Illinois employment law attorney Mount Prospect elder law attorney employee rights Des Plaines personal injury lawyer Policy Cancellation nursing home negligence Illinois Crystal Lake bike accident lawyer swimming pools Rolling Meadows personal injury lawyer Chicago biking tips Rolling Meadows employment attorney Inverness estate planning lawyer insurance claim denial real estate Palatine construction attorney Illinois living will Illinois real estate GM ignition switches pregnant women Buffalo Grove medical malpractice lawyers Chicago insurance law firm School Visitation Rights Act Illinois traffic accident lawyer trucking accident lawyers Schaumburg medical malpractice lawyer Illinois workers compensation attorney taxes murder defense Super Mario Illinois employee rights attorney. no contest clauses Arlington Heights personal injury attorney gift taxes Schaumburg probate attorney pain and suffering trucking accidents motorcycle accident insurance attorney probate personal injury claims digital assets, digital fiduciary, estate planning, digital content, Long Grove estate planning lawyers Crystal Lake medical malpractice law firm wrongful death Des Plaines accident attorney insurance claims distracted driving accident victims Illinois civil litigation lawyer civil litigation attorney condo association foreclosed rental property medical marijuana Crystal Lake injury attorney Illinois insurance claims lawyers insurance claim dispute Rolling Meadows Attorney digital information tax attorney operating agreements icy parking lots Illinois will lawyer criminal defense Illinois pedestrian accident attorney Illinois estate planning attorney medical malpractice compensation Deer Park medical malpractice attorney Schaumburg personal injury lawyers Schaumburg personal injury attorney employment lawyer Illinois personal injury lawyer Schaumburg Attorney Inverness insurance attorney landlord Deer Park employment law attorney Illinois workplace lawyer Crystal Lake civil litigation lawyer defective products Chicago lawyer homestead rights license suspension healthcare claims insurance adjusters Crystal Lake traffic attorney Illinois pet lawyer fiduciary rule caretaker rights Des Plaines Illinois estate planning blended families truck collisions Illinois home inspection traffic tickets license pedestrian accident elder abuse drunk driving overtime violations golf accidents brain injury Deer Park criminal attorney Kenilworth estate planning lawyer Schaumburg personal injury lawyer Crystal Lake employment law attorney deadly crashes Schaumburg real estate lawyer Barrington workers compensation attorney Deer Park personal injury lawyer rest breaks corporate law employment contract agent BAIID premises liability Schaumburg employment law attorneys digital media accounts, estate planning, Arlington Heights estate planning attorney, Illinois injury lawyer medical malpractice, missed diagnosis, delayed diagnosis, medical mistake, Deer Creek medical malpractice lawyers Inverness injury lawyer texting while driving Illinois motorcycle accident lawyer slip and fall accidents right to work estate planning for college students Rolling Meadows criminal lawyer civil litigation startup company unauthorized overtime probate lawyer Illinois car accident attorney Illinois mortgages Illinois defective products attorney boating accidents Arlington Heights trucking lawyer Illinois medical malpractice attorney Employment Discrimination Law Buffalo Grove criminal defense lawyer personal injury lawyer uninsured motorist traumatic brain injuries landlord tenant law DMV hit and run accident commercial leasing Illinois Transfer on Death Instrument Chicago employment lawyer Rolling Meadows boating crash lawyer Palatine corporate attorney PTSD Des Plaines insurance attorney Illinois small business llinois Real Estate Lawyers Association trust payments products liability rollover accidents DUI attorney Mount Prospect real estate lawyer bicycle dooring accidents DUI penalities Arlington Heights wills and trusts attorneys financial advisors Illinois trucking safety medical malpractice investment property dog bites breach of contract Palatine estate planning lawyer Deer Park motorcycle accident lawyer traumatic brain injury Chicago estate planning unfunded trust underfunded trust insurance dispute, insurance dispute lawyers, insurance claim denial, insurance claim delays, Rolling Meadows insurance dispute attorneys Detainer Actions Federal Food Drug and Cosmetic Act Chicago estate planning lawyer product liability Illinois Human Rights Act insurance agents privacy laws Home Remodeling Repair Act Affordable Care Act Des Plaines personal injury attorney Des Plaines pet law attorney Schaumburg drug defense lawyer pedestrian-automobile accident ken apicella minimum wage Whistleblower Claims rumble strips first degree murder Illinois lawyer Illinois medical malpractice claim Crystal lake insurance dispute attorney spinal cord injuries Crystal Lake will lawyer Illinois traffic laws Barrington criminal defense lawyer Home Sale Contingencies Crystal Lake car accident attorney Barrington estate planning attorney Illinois business law atorneys income distribution deducation wrongful termination employment contract, employment law, employment at-will, Deer Park employment law attorneys, contract, Schaumburg criminal attorney Illinois driving without license real estate leasing license reinstatement Schaumburg civil litigation attorney wrongful termination, employment law, whistleblower protections, Illinois employment laws, discrimination in the workplace digital assets LLCs trustee Illinois insurance claim dispute lawyers personal injury pedestrian accidents real estate lawyer Illinois Probate Act of 1975 traffic crimes Illinois insurance dispute lawyers Schaumburg construction accident lawyer severance agreements comp time Buffalo Grove personal injury lawyer probate claims process Palatine workers compensation lawyer unpaid assessment manufacturing Mount Prospect wills and trusts lawyers medical malpractice claims senior citizens Deer Park traffic accident attorney trauma after an accident appealing an insurance claim Inverness elder law lawyer traffic violations loopholes wills contracts living trust vs will Des Plaines collections attorney personal injury law firm back injuries Buffalo Grove probate lawyer surgical mistakes Buffalo Grove injury lawyer Buffalo Grove corporate attorney Crystal Lake business law attorneys Barrington employment attorney Palatine trusts lawyer Illinois trusts attorney breathalyzer test Rolling Meadows insurance attorney vacation home Arlington Heights tax lawyer estate tax Liquor Control Act Palatine civil attorney capital gains tax cell phone Illinois corporate lawyer traffic deaths cell phone tower data marijuana crimes attorney Deer Park DUI lawyer preventable medical errors clemency probate fees whistleblower protections Food and Drug Administration's Food Safety Modernization Act bike accident Buffalo Grove insurance claim dispute lawyers Illinois personal injury attorney Palatine criminal defense lawyer estate planning lawyer Arlington Heights TBI attorney health insurance dispute automated cars expungement Chicago corporate attorney hiring employees Illinois elder law attorney workers comp business litigation Fair Labor Standards Act controlled substance personal injury, auto accident injuries, delayed injuries, serious injuries, Des Plaines personal injury attorneys estate plan dynasty trusts Des Plaines medical malpractice attorney Palatine Attorney overtime pay Deer Park traffic lawyer Chicago insurance claim attorneys insurance denial appeals driving murder charges Arlington Heights employment attorney installment contracts car accidents Buffalo Grove traffic lawyers car crash injuries South Barrington real estate lawyer advance healthcare directive Arlington Heights traffic attorney pay when paid contract Colin Gilbert irrevocable trust reckless homicide motorcycle accident lawyer employment law, Illinois employment laws Des Plaines drug lawyer probate process involuntary manslaughter Palatine drug lawyer job lawyers insurance agent negligence BUI drug crimes lawyer subcontractor Illinois employment law attorneys sexual images Illinois collections attorney condo Arlington Heights pedestrian accidents Chicago employment attorney Palatine punch death Attorney Ken Apicella employee discrimination Rolling Meadows probate lawyer Buffalo Grove real estate attorney car accident lawyer Inverness personal injury attorney construction contracts Illinois Workers’ Compensation Commission Illinois insurance claim attorney ObamaCare bad faith insurance claims Joliet general practice lawyers guardianship attorney Rolling Meadows business lawyer comparative negligence Inverness traffic law firm Crystal Lake pet attorney Illinois medical malpractice lawyers Illinois wrongful termination lawyer Des Plaines DUI attorney head on collisions Schaumburg estate attorney Rolling Meadows personal injury attorney Illinois traffic attorney disability benefits internet POA unpaid overtime Illinois Wage Payment and Collection Act Barrington criminal lawyer Rolling Meadows drug defense attorney CAM Illinois registered agent Rolling Meadows real estate attorney Arlington Heights lawyer Barrington real estate lawyer Crystal Lake medical malpractice lawyer criminal law natural gas explosion caregiver Illinois red light cameras Crystal Lake criminal defense attorney Rolling Meadows tax attorney Illinois insurance lawyer Illinois business lawyer attorney fees DUI Barrington employment law firm Palatine insurance lawyer Do Not Resuscitate estate planning, death tax, succession plans, business estate plans, Barrington estate planning lawyers Barrington civil litigation attorney workers compensation benefits Palatine personal injury lawyer Illinois real estate lawyer DUI defense Illinois jet ski accident lawyer pedestrian injuries, pedestrian fatality insurance negligence Rolling Meadows estate planning attorney Illinois workers compensation lawyer underage DUI Illinois medical malpractice case Palatine business attorney special needs trust Palatine probate lawyer fatal car accidents Illinois tax attorney underinsured motorist workers compensation Kenilworth estate planning attorneys probate claims Rolling Meadows Barrington personal injury attorney Thanksgiving eluding a police officer Illinois speeding lawyer power of attorney Deer Park accident attorney digital evidence Rolling Meadows DUI lawyer bicycle accidents filing a medical malpractice claim Des Plaines injury law firm Rolling Meadows traffic attorney estate planning trusts commercial real estate Palatine traffic accidents Barrington drug crime attorney elder law Arlington Heights car accident lawyer Des Plaines civil attorney new real estate form DGAA Crystal Lake tax lawyer privacy marijuana IRS living trust benefits Rolling Meadows medical malpractice lawyers Barrington attorney deed transfer federal crimes Des Plaines drug crimes lawyer life insurance denial of life insurance federal regulations for LLCs murder FMLA Arlington Heights wills and trusts lawyers meal breaks Illinois job attorney Chicago traffic lawyer speeding Arlington Heights wills and trusts attorney field sobriety test ACA Palatine injury attorney insurance claim dispute attorney Barrington personal injury lawyer IRELA license revocation Illinois DUI attorney Rolling Meadows traffic law firm Arlington Heights Traffic Lawyer boating DUI Illinois probate lawyer Buffalo Grove car accident lawyer car crash Chicago will attorney creditors small business insurance dispute attorney South Barrington real estate attorney denied insurance claims Class A misdemeanor Palatine employment law lawyer Illinois traffic ticket lawyer problem employees low-ball insurance settlement Buffalo Grove law firm insurance claim denials revenge porn insurance claim sexual harassment insurance disputes, Illinois insurance disputes, Illinois insurance dispute attorneys, denied insurance claims, Arlington Heights insurance dispute attorneys Palatine employment lawyer Rolling Meadows employment law attorney liability drug crimes healthcare Crystal Lake medical malpractice attorneys Schaumburg employment attorney Palatine corporate law attorneys FSLA pet law real estate zoning Arlington Heights Attorney Rolling Meadows criminal attorney personal injury claim Illinois employment law firm pizza emoji Arlington Heights personal injury lawyer estate attorney Illinois personal injury Des Plaines tax law firm power of attorney for healthcare Illinois criminal defense attorney Des Plaines Traffic Lawyer Family Medical Leave Act Long Grove wills and trusts attorneys Palatine real estate lawyer Exclusions Inverness civil lawyer denied insurance claim wills and trusts suspended license real estate contract Illinois estate planning law firm college kids paid sick leave Rolling Meadows marijuana attorney car accident lawyers drunk driving statistics owner responsibility Long Grove estate planning attorneys food poisoning IRA benefits blood alcohol content Illinois Sales Representative Act wage theft residential real estate Rolling Meadows litigation lawyer Barrington Traffic Lawyer construction accidents, personal injury, wrongful death, Arlington Heights personal injury attorneys, workers' compensation employment law Fourth of July commercial leases Illinois wills and trusts insurance claim delay loss of consortium Barrington injury attorney Schaumburg corporate attorney texting and driving trench injuries fault based insurance Long Grove estate planning Schaumburg traffic lawyer crossover accidents Illinois wills and trusts attorneys Illinois insurance attorney car accident Palatine law firm fiduciary rule delay home inspection lawyer Inverness accident lawyer Barrington litigation attorney Des Plaines criminal attorney Crystal Lake law firm Mt Prospect Attorney Schaumburg criminal law attorney social media after death Crystal Lake employment lawyer Forcible Entry Arlington Heights injury attorney dealing with problem employees Barrington business law firm drug possession consent to a search Des Plaines motorcycle accident attorney slip and fall forming a corporation in Illinois Illinois rollover accident lawyers Chicago trucking accident attorney accidental death benefits Schaumburg wrongful death attorney Arlington Heights estate planning attorney Illinois employment laws Crystal Lake traffic lawyer natural gas Schaumburg injury lawyer employees Buffalo Grove traffic attorney sole proprietorship work unions Rolling Meadows Traffic Lawyer modern family estate planning Illinois employment law mortgage IRA trust transfer anesthesia errors Arlington Heights wills and trusts lawyer Inverness DUI lawyer traffic violations defense Arlington Heights car crash attorneys Rolling Meadows employment law attorneys living wills Inverness real estate attorney Des Plaines real estate lawyer changes to mortgage law Arlington Heights employment law attorneys Kenilworth estate planning attorney insurance dispute vacation home fines Illinois employment lawyer estate planning Long Grove estate planning attorney medical research Schaumburg pet bites Buffalo Grove personal injury attorney medication errors in terrorem provision auto accidents rent to own real estate contracts defective products lawyer Rolling Meadows insurance dispute lawyers, insurance dispute Des Plaines personal injury lawyers Crystal Lake insurance lawyer civil rights violation Self-Directed IRA Accounts Inverness corporate attorney personal injury attorney Legal Info life insurance claims hands free device DNR boating under the influence criminal record dram shop law traffic accidents Arlington Heights insurance attorney liability claims insurance denials preventing accidents Illinois employment attorneys Crystal Lake car accident lawyer real estate attorney Schaumburg estate planning attorney Inverness probate lawyer Crystal Lake employment attorney Arlington Heights criminal lawyer holiday statistics Palatine elder law attorney life insurance policy employment law, meal breaks, rest breaks, hotel employees, Des Plaines employment law attorneys Palatine employment attorney Arlington Heights real estate lawyer foreclosure insurance disputes compensatory time

Archive