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5 Ct. Uncourt 33 (2018)
Pay When Paid and Pay If Paid - UAE Perspective

handle is hein.journals/counco5 and id is 489 raw text is: PAY WHEN PAID AND PAY IF PAID- UAE PERSPECTIVE Introduction he subcontractors play a vital role in the construction industry as sub-contracting work represents a significant portion of a construction project. It is a natural concern for subcon- tractors to worry about getting paid on time for construction performed. Construction contracts often contain provisions that determine when a general contractor will pay a sub-contractor. Payment issues are considered to be one of the leading causes for the delay of a construction project. The procedure of construc- tion contract payments from the owner to the general contractor and finally to the sub-contractor is an inher- ent part of any plan. Sometimes, main contractors may fail to make payments to their subcontractors when they have not received the corresponding payments from the employer. As a result, the main contractor often includes contingent payments in subcontracts and passes the payment related risks to the subcontrac- tors. The conditional clauses Pay-when-paid and Pay-if-paid can be broadly divided into categories, namely 'pay-when-paid' and 'pay-if-paid' clauses. These clauses are very infamous in the field of the construc- tion industry, especially at the sub-contracting level. Thejurisdiction of various countries consider contractu- al arrangements under the clause 'pay-when-paid' are either void or regarded as doubtful. This conditional payment mechanism allocates various benefits and profits to the contractor, but on the other hand, leads to a serious hindrance in the sub-contractor's cash flow. Pay-when-Paid A pay-when-paid generally refers to the timing by which a general contractor will pay a sub-contractor after receiving the payment from the owner. In order to enforce these types of clauses, there must be the guarantee of the amount within a reasonable time, regardless of whether the owner pays the general contractor. Without this guarantee, the clause will be unenforceable and would be equivalent to Pay-if-Paid. The primary purpose of the pay-when-paid provision is to defer payment to the point of time that is determined by a specific event, namely the payment by the employerto the contractor. Under English Law, the first case recognizing 'pay-when-paid' was in 1974 in Modern Engineerng imited GibertAs Lmited The objective of this clause was to protect the main contractor's cash flow. In the case, it was decided that the main contractor bears alone the risk of insolvency of an employer, it makes all sub-contractors in addition to the main contractor liable as well. In Singapore, in the case Brightside Mechancal and Electrca! Services Group v Hyundai Engineerng and Construction Co Ltd., the court also upheld the 'pay-when-paid' clause. Paid-if-Paid A paid-if-paid is the provision in a sub-contract which usually means that the contractor is not required to pay the sub-contractor unless and until the contractor receives the payment from the owner. When the owner fails to pay the contractor, the contractor is not required to pay the sub-contractor. The payment process is considered to be the most significant risk in a construction process. The payment for the subcontrac- tor shall depend on the method of payment from the employer to the main contractor, eventually the main contractor to the subcontractor. Upon the completion of the work, a contractor, subcontractor, and the suppli- ers all require payment on a timely basis. General contractors frequently face claims for delay exudes from the sub-contractor. In such cases, the subcontrac- tor becomes an innocent victim of non-payment for reasons which are not attributable to their works. Court nco rt 33

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