Pay-if-paid clauses in California
“We’ll pay you when the owner pays us” is a timing promise at most — in California it is never a reason you don’t get paid.
Nearly every subcontract has one: a clause saying the GC pays you if — or when — the owner pays the GC. Subs read it and assume that if the owner stiffs the GC, they eat the loss. In California, that assumption is wrong, and it has been since 1997.
Clarke v. Safeco: the death of pay-if-paid
In Wm. R. Clarke Corp. v. Safeco Ins. Co.(1997) 15 Cal.4th 882, the California Supreme Court held pay-if-paid clauses unenforceable. The logic: California’s constitution protects mechanics lien rights, and the statutes void any advance contractual waiver of them (now Cal. Civ. Code § 8122). A clause that shifts the owner’s insolvency risk onto the sub — “you get paid only if we do” — is an indirect waiver of those rights, so it fails.
Pay-when-paid: timing, not condition
A pay-when-paid clause survives, but it means less than GCs imply. It lets the GC wait a reasonable timefor owner funding before paying you — it does not make owner payment a prerequisite. If the owner never pays, the GC still owes you. “The owner hasn’t paid us yet” is, at most, a short-term scheduling answer; it is never a final one.
What this means on a real job
- Don’t let the clause slow your notices. Serve your preliminary notice and track your lien deadline like on any other job — the clause has no effect on those rights (§ 8122).
- Don’t accept “waiting on the owner” indefinitely.After a reasonable time, the GC’s obligation is due. An intent to lien letter reframes the conversation quickly.
- Escalate on the payment-rights track, not the contract track. Arguing contract language takes lawyers and months; a preliminary notice, intent to lien letter, and mechanics lien work on statutory deadlines you control.
Frequently asked questions
Related guides
Your lien rights outrank the contract
Notice Harbor keeps them alive — preliminary notices, deadline tracking, intent to lien letters, and lien recording for California subs. Your first notice is free.
Start your free noticeThis page is general information, not legal advice, and does not create an attorney–client relationship. California lien and notice deadlines are strict and fact-specific — “completion” alone can be triggered by actual completion, the owner’s occupancy or use, or a 60-day cessation of labor. Notice Harbor is not a law firm. Confirm any deadline that matters to your claim with a licensed California construction attorney.