Not receiving payment for your work is a principal concern on every job. Especially today, with everyone facing tough economic challenges, it has become a real concern to get paid when you are supposed to.

What happens when a borrower has earmarked portions of a construction loan for specific purposes but those designated funds are then subsequently disbursed by the lender for another purpose?

It is customary for general contractors to include pay when paid clauses in their contracts, attempting to limit any requirement on their part to pay their subcontractors until they’ve received payment from the project’s owner.

Stay in business long enough and you will inevitably become a creditor in someone’s bankruptcy – a disappointing development made worse when you receive a demand from the Trustee’s counsel asking for the return of a payment you recently received from the bankrupt debtor.

Given the vagaries and uncertainties these days in loan commitments as well as material prices, not to mention the overall state of the construction industry, one can quickly understand why pay-when-paid provisions have become so critical in construction contract negotiations.

A recent case addressed a little known Florida statute. Fence Masters Inc. v. Zurqui Construction Services Inc. stemmed from a subcontractor’s request for payment on work done to improve public property under a contract with a general contractor.