In Pencoyd Iron Works v. Axis Constr. Services, Ltd., 2012 Phila. Ct. Com. Pl. LEXIS 23 (January 18, 2012), the trial court enforced a pay if paid clause in a subcontract, finding the subcontractor assumed the risk of nonpayment in the event the general contractor was not paid by the owner.  The language of the pay if paid clause in the subcontract was as follows:  "Payment from Owner to Contractor is a condition precedent to payment from the Contractor to the Subcontractor" — [I]n the event that payment is not made to the Contractor from Owner for any reason — Subcontractor shall look exclusively to the Owner for payment. . ."  Hawaii's appellate courts have not yet ruled on the enforceability of a pay if paid clause in a subcontract.  The contract language in this case is pretty strong, although it could even be made stronger by a preface noting that the subcontractor agrees to accept the risk of nonpayment in the event the contractor is not paid for the subcontractor's work.  In this case, the trial court found that because the subcontractor admitted on the stand that the contractor was not paid for its work, and the owner likewise testified, the subcontractor had no basis for complaint, either under the state's prompt payment statutes, or under an equitable claim of unjust enrichment.  

Submitted by Anna Oshiro