Specific Language Needed for Valid Pay When Paid Clause in Florida

In Peacock Construction Company, Inc. v. Modern Air Conditions, Inc., 353 So.2d 840, the Florida Supreme Court looked at the issue of pay when paid clauses and their validity.  The Court reviewed a contract provision which provided that the subcontract would be paid: “within 30 days after the completion of the work included in this sub-contract, written acceptance by the Architect and full payment by the Owner.”  The Court held that this provision was ambiguous because it can be construed as pay within a reasonable time or that payment was contingent upon the prime contractor’s receipt of payment from the owner.  Because of the ambiguity, the Court held that the payment clause required payment within a reasonable time regardless of whether the prime contractor received payment.   

The Court held that because this provision was a risk-shifting provision, the clause must contain specific language in order for it to be enforceable.  The clause must expressly state that payment to the subcontractor is conditioned upon receipt of payment by the prime contractor from the owner.  The Court also noted the public policy reason of holding pay when paid clauses to a higher standard.  Often, subcontractors are smaller than their prime contractor counterparts and cannot afford to bear the risk of owner non-payment. 

Trenton H. Cotney
Board Certified in Construction Law

Trent Cotney, P.A.

1207 N Franklin St, Ste 222

Tampa, FL 33602

(813) 579-3278

www.trentcotney.com