Goodbye to Pay when Paid, April 2012

04-04-2012

Pay when paid and pay when certified clauses developed within the construction industry to deal with the risk of the ultimate employer failing to make payment to the main contractor for works undertaken, and essentially providing that, should this happen, neither the main contractor nor its sub-contractors would be paid. Pay when paid or pay when certified clauses make payment of the sub-contractor, by the main contractor, conditional upon payment by the employer and/or certification under the main contract in respect of the sub-contract work. Such clauses operate on the principle that a main contractor should not become liable to pay his sub-contractor for work carried out until after such time as he has received payment from his client. This necessarily involves a sub-contractor affording a longer credit period to the main contractor than the main contractor, in turn, gives to the employer. The standard forms of sub-contract typically used in Ireland tend to tie the sub-contractor’s entitlement to be paid to both certification and payment under the main contract.

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