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.


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


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