Pay-If-Paid Clauses in Colorado: What Subcontractors Should Know

Your work is done. The general contractor says the owner hasn’t paid, so you don’t get paid either, and points to a clause in your subcontract. Is that the end of it?

Not necessarily. In Colorado, the exact words of the clause matter a lot. This guide explains how the Colorado Supreme Court reads these clauses and what that can mean for a subcontractor owed $10,000 or more.

GC holding your payment because the owner hasn’t paid? Request a free claim review.

Pay-when-paid vs. pay-if-paid

• Pay-when-paid is about timing. The GC can wait a reasonable time for the owner’s payment, but still has to pay you.
• Pay-if-paid shifts risk. If the clause is valid, you get paid only if the owner pays, and you carry the risk that the owner never does.

How Colorado courts read these clauses

The leading Colorado case is Main Electric, Ltd. v. Printz Services Corp., 980 P.2d 522 (Colo. 1999). The Colorado Supreme Court held:

• A clause saying payment is due “provided like payment shall have been made by owner to contractor” was a pay-when-paid clause. It set timing. It did not make the owner’s payment a condition of the sub getting paid.
• For a clause to be pay-if-paid, it must unequivocally say that the subcontractor is paid only if the owner pays, and that the subcontractor bears the risk of the owner’s nonpayment.
• If the language is unclear, the court reads it as a promise to pay within a reasonable time, not a condition.

Colorado’s private-project retainage statute also says it doesn’t override contract terms that make payment conditional, including pay-if-paid provisions (C.R.S. § 38-46-103(2)(d)). So the wording of your subcontract is what decides it.

Other paths that may still be open

• Mechanic’s lien. A pay-if-paid clause between you and the GC doesn’t decide your lien rights against the property. The Colorado lien deadlines still apply: notice of intent at least ten days before recording, and generally four months to record (C.R.S. § 38-22-109).
• Public projects. On Colorado public works over $150,000, the contractor must pay subs within seven calendar days after receiving payment (C.R.S. § 24-91-103), and subs can file a verified statement of claim before final settlement (C.R.S. § 38-26-107).
• Trust fund claims. Colorado treats construction funds paid to a contractor as held in trust for subs and suppliers. See the Colorado construction trust fund statute.
• The GC’s own fault. If the owner didn’t pay because of the GC’s problems, or the GC settled with the owner and kept the money, your attorney may have other arguments.

Read the clause, then act on the deadlines

Don’t wait for the owner and GC to sort it out. Lien deadlines keep running while you wait. Pull the subcontract, find the payment clause, and get it in front of an attorney. See subcontractor not paid by the GC in Colorado.

How Darkwell helps

Legal costs are often what stops a good claim. Darkwell helps carry them. For a subcontractor stuck behind a payment clause, that can mean funding the lien and litigation work it takes to get paid.

• We help carry the cost. Darkwell funding helps pay for the case, so your operating cash stays in your business.
• We bring attorneys we know. Darkwell has a network of attorneys we know. They help keep costs down while still pursuing the claim. The claim moves forward with an attorney from our network, or your current attorney where it fits.
• Your attorney handles the law. We don’t run your case or choose your legal strategy. Your attorney does that.
• You make a clear decision. The goal is to take the stress out of the fight and make the smart financial decision about your claim.

What to send for a claim review

• Your subcontract, including the payment clause
• Pay applications, invoices, and payment history
• Emails or letters where the GC says the owner hasn’t paid
• Any notice of intent, lien statement, or bond claim so far
• Project address and whether it’s private or public

How we get paid

Our fee comes out of the recovery, not your pocket. If there’s no recovery, you don’t repay our funding. Your written agreement sets the exact terms.

Where we work and claim size

For business claims, we fund in many U.S. states, reviewed state by state, where champerty rules and litigation funding laws allow our model. We confirm your state during review. See where Darkwell funds claims.

We review claims of $10,000 or more, subject to review and approval by our team.

Darkwell does not buy or collect consumer debt in states that require a collection license, including Colorado.

Common questions

Are pay-if-paid clauses enforceable in Colorado? They can be, if the clause clearly says you’re paid only if the owner pays and that you bear the risk of the owner’s nonpayment. Unclear wording is read as pay-when-paid. An attorney needs to read your clause.

My clause says “payment within 10 days after contractor receives payment.” Which is it? Under Main Electric, wording about timing alone was read as pay-when-paid. Your attorney will look at the whole clause and contract.

Can I still file a mechanic’s lien? Often, yes, if you meet Colorado’s notice and timing rules. The payment clause is between you and the GC.

Does Darkwell control the case? No. Your attorney handles the case and the legal strategy.

Sources

• Main Electric, Ltd. v. Printz Services Corp., 980 P.2d 522 (Colo. 1999)
• C.R.S. § 38-46-103
• C.R.S. § 38-22-109
• C.R.S. § 24-91-103
• C.R.S. § 38-26-107

Stuck waiting on a payment clause while your deadlines run? Request a free claim review. Send what you have, and you’ll get a response from our team.

Related reading: Subcontractor Not Paid by the GC in Colorado · Colorado Construction Trust Fund Statute · Colorado Notice of Intent Deadline · Colorado Mechanic’s Lien Guide · Subcontractor vs. General Contractor Claims · Unpaid Retainage in Colorado · Colorado Litigation Funding