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Payment Provisions in Construction Contracts: Mitigating Risk of Nonpayment in a Volatile Market

Stop Work, Paid-When-Paid, Paid-If-Paid, and More; Jurisdictional Limitations; Drafting and Enforcement Considerations

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Tuesday, November 21, 2023

Recorded event now available

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This CLE webinar will guide construction counsel on best practices when negotiating and drafting contractual payment provisions for contractor, subcontractor, or supplier clients in the construction industry. The panel will discuss stop work provisions and highlight key differences between paid-if-paid (PIP) and paid-when-paid (PWP) clauses as well as address jurisdictional concerns. The panel will also provide an overview of nonpayment enforcement remedies under these contractual provisions as well as others such as under general contract and common law.


In a volatile real estate market, nonpayment in construction projects is becoming more common. Therefore, well drafted payment provisions in construction contracts are imperative to ensure parties are paid in a timely manner, or alternatively, have appropriate remedies at their disposal if they are not paid.

Three of the most common provisions relating to payment in construction contracts are stop work, PIP, and PWP provisions. Stop work provisions inform all parties about the consequences for slow or non-payment and typically include, among other things, a timeline or process for stopping the project. Without a well drafted stop work clause, suspension of work could result in liability for the non-paid party.

PIP and PWP provisions establish when lower-tier subcontractors and suppliers are paid. A PIP provision is a condition precedent that requires payment from the owner to the general contractor or higher-tier subcontractor before payment is made to the lower-tier subcontractor or supplier. PIP clauses shift the risk of nonpayment to the lower-tier subcontractors or suppliers. Jurisdictional enforceability of PIP clauses varies greatly.

On the other hand, PWP clauses are essentially timing provisions that allow the general contractor or higher-tier subcontractor a reasonable amount of time to comply with its duty to pay the lower-tier subcontractor or supplier, but it does not extinguish the responsibility for payment. PWP clauses are also jurisdiction sensitive. Therefore, counsel should clearly understand the jurisdictional treatment for both provisions as well as how these provisions may interact with other enforcement rights. For example, in some states where PIPs are allowed, the provision may not be enforceable where a mechanics lien has been filed.

In the event of nonpayment, counsel should be aware of enforcement mechanisms under these contractual provisions as well as others such as those under general contract and common law.

Listen as our expert panel provides best practices for negotiating and drafting payment provisions in construction contracts and addresses various enforcement mechanisms in the event of nonpayment.



  1. Overview of construction payment provisions
  2. Prompt payment laws
  3. Stop work clause
  4. PIP vs. PWP clauses
    1. Jurisdictional considerations
    2. State law update
    3. Case law update
    4. Possible effects on other remedies
  5. Nonpayment enforcement remedies
    1. Stop work, PIP, and PWP
    2. General contract law
    3. Common law
    4. Mechanics lien
    5. Prompt payment laws
  6. Best practices for mitigating the risk of nonpayment


The panel will review these and other important considerations:

  • What are the differences between stop work, PIP, and PWP provisions and what are key drafting considerations for each?
  • What are jurisdictional considerations for PIP and/or PWP provisions in contracts?
  • How do contractual payment provisions interact and possibly affect other remedies such as mechanics liens?
  • What other nonpayment enforcement mechanisms are available to counsel outside of stop work, PIP, and PWP provisions?


Cahalan, Scott
Scott D. Cahalan

Smith Gambrell & Russell

Mr. Cahalan has substantial experience representing owners, contractors, subcontractors, engineers, architects,...  |  Read More

McNamara, John
John McNamara

Founding Partner
Lane McNamara

Mr. McNamara’s practice areas include construction law, employment law, suretyship, trial practice and insurance...  |  Read More

Wickard, William
William D. Wickard

Of Counsel
K&L Gates

Mr. Wickard concentrates his practice on construction and commercial litigation along with negotiating and drafting...  |  Read More

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