How should pay-when-paid terms be handled to remain compliant?

• A. Pay immediately regardless of payor status.
• B. Require the payor's payment before processing any invoice.
• C. Ensure compliance with statutory timing and contract terms before paying.
• D. Delay payment until audit clearance.

Answer: (C)

Pay-when-paid terms tie downstream payments to the upstream payment you receive from the owner, so staying compliant means aligning your payment timing with what the law and the contract require, not simply waiting for the owner to pay you. You should release funds to subcontractors within the statutory timing and the contract’s own due dates and conditions before paying, and only withhold as allowed by those same rules. In other words, honor prompt-payment statutes and any contract-specific payment terms, ensuring you don’t delay payments beyond what is legally permitted. This approach protects against breach claims and keeps cash flow predictable for subcontractors, while recognizing that enforceability of pay-when-paid clauses can vary by jurisdiction.