Pay If Paid Clause Infographic: In Which States Are They Void?

Pay if paid clauses are an attempt to shift the risk of non-payment on construction projects to subcontractors, suppliers, and other parties on the lower end of the payment chain. These clauses are looked upon with disfavor by courts in most states, and require certain specific language in order to be valid, where they can be. Several states, however, have outlawed pay if paid clauses entirely, as against public policy, either by court decision or through legislative action. The infographic below provides a nice quick and easy guide to the states in which pay if paid clauses are disallowed.


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3 responses to “Pay If Paid Clause Infographic: In Which States Are They Void?”

  1. Rob Pitkin Avatar
    Rob Pitkin

    Great graphic, but a couple of clarifications. Kansas passed the Fairness in Private Construction Act in 2005, KSA 16-1801 et seq., one part of which invalidates pay-if-paid clauses when there is a mechanic’s lien or payment bond claim. KSA 16-1803(c). However, a couple of lower courts have ruled that the Act does NOT invalidate pay-if-paid clauses generally, such as in a breach of contract claim by an innocent unpaid subcontractor against the prime/general contractor. Missouri has a similar statute invalidating a pay-if-paid defense by an owner in a mechanic’s lien case. § 431.183, RSMo.

    1. Nate Budde Avatar

      Thanks for the clarifications. Along with Kansas and Missouri, Illinois, Indiana and Ohio have similar provisions in that pay if paid clauses are disallowed from interfering with mechanics lien rights – but could be ok otherwise. Another post goes into more detail than the infographic can. I appreciate the heads-up – and I think the main takeaway here is for companies to protect mechanics lien rights.

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