Pay-When-Paid Clause Does Not Shift Risk of Non-Payment to Subcontractor

Otis Elevator Co. v. Hunt Constr. Group, Inc., 859 N.Y.S.2d 850 (N.Y. App. Div. 2008)

In this case, plaintiff subcontractor sought damages resulting from an alleged breach by defendant general contractor for payments due under the subcontract.  Both parties moved for summary judgment.  Defendant argued that its receipt of payment from the owner was a condition precedent to its obligation to pay plaintiff, and that it was under no obligation to pay because it had not yet received payment from the owner.  The court rejected this argument, holding that “the pay-when-paid clause in the subcontract merely regulated the time of payment, and did not shift the risk of owner nonpayment to plaintiff.”  Because plaintiff submitted evidence establishing its entitlement to payment, plaintiff’s motion for summary judgment was granted, and defendant’s motion was denied.

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