Hawaii Payment Terms Guide & FAQs

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Hawaii Payment Terms Overview

Hawaii Payment Terms Overview


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Pay when Paid valid Icon
Pay when Paid Valid (Likely Enforceable as Pay If Paid if Clear)

In Hawaii, pay when paid clauses are likely enforceable as pay if paid clauses sufficient to be a condition precedent to payment. HRS § 444-25 states that If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor's solicitation of bids.


Pay If Paid Likely Valid

Likely enforceable. No Hawaii courts have specifically addressed the issue – but Hawaii statutes seem to allow for the enforcement of pay if paid clauses. HRS Sec. 444-25: “If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor’s solicitation of bids.”


Trust Fund Statute Does Not Exist

Hawaii does not have a trust fund statute that specifically governs the treatment of construction funds prior to payment.


Retainage Unregulated Icon
Retainage Unregulated

Hawaii does not regulate retainage amounts or process on private jobs. Accordingly, retainage on private projects is set and governed solely through contract.


10
DAYS
Payment Due to Subs/Suppliers in 10 Days

For Subs & Suppliers, payment must be made within 10 days of invoice, but may be withheld until funds received from escrow or trust if lower-tiered party was made aware of such limitation in bid process. There is no regulation of time for payment from owner to prime on private projects in Hawaii.


lien waivers not regulated
Lien Waiver Form Not Regulated

Hawaii does not mandate the use of a particular lien waiver form by statute, so parties are free to use and form with any words they want. Additionally, Hawaii does not regulate the timing of lien waivers, so participant on Hawaii projects must be careful to review contracts and pay attention to both the timing and content of waivers.

Pay when Paid valid Icon
Pay When Paid Likely Valid as Pay If Paid

Likely enforceable. No Hawaii courts have specifically addressed the issue – but Hawaii statutes seem to allow for the enforcement of pay-if-paid clauses. HRS Sec. 444-25: “If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor’s solicitation of bids.”


Pay If Paid Likely Enforceable

Likely enforceable. No Hawaii courts have specifically addressed the issue – but Hawaii statutes seem to allow for the enforcement of pay-if-paid clauses. HRS Sec. 444-25: “If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor’s solicitation of bids.”


Trust Fund Statute Does Not Exist

Hawaii does not have a trust fund statute that specifically governs the treatment of construction funds prior to payment.


Retainage 5% Icon
Retainage Limited to 5%

A contractor or subcontractor may retain no more than 5% of any partial payment due under a subcontract. Once 50% completion has been reached, if performance is satisfactory, the public entity may pay any retainage amount previously withheld.


10
DAYS
Payment Due to Subs/Suppliers in 10 Days

Payment to subs/suppliers is due within 10 days after payment received from above. Payment to GCs due within 30 days of invoice.

Construction payment is highly regulated all over the United States, and this includes Hawaii. every state has at least some legislation related to payment timing, what percentage of payment may be withheld, how lien rights or other security instruments play into the payment scheme, and more. All of these legislative directives, however, must be balanced with the ability of construction participants to freely contract as they see fit.

In Hawaii, the scales generally tip toward freedom of contract (with a few exceptions). Generally, on private projects, property developers, contractors, and suppliers can enter into construction contracts that control payment terms with very little oversight or limiting regulation from statute. Hawaii allows parties on most private projects to set the the retainage amount process, the timing and content of lien waivers, and even agree to shift the risk of nonpayment to parties lower on the payment chain through settingh pay if paid provisions, as specific conditions precedent to payment.

All of this means that construction participants on projects in Hawaii should be very careful and thorough in reviewing their contracts, and every payment document to be exchanged. This is especially since some pay if paid provisions are included in “standard” construction contracts, and lien rights can be waived prior to work.

Lien waivers are generally unregulated in Hawaii. Not only may parties may use any form with any wording they want, lien rights can be waived at any time, even in a contract prior to furnishing work.

There are some key laws that regulate the construction payment process in Alaska, which include:

Public projects in Hawaii have a little more regulation governing the payment terms. Retainage is limited to 5%, and can be released upon 50% project completion. Payment is required to be made within certain timeframes (10 day from payment from above for subs/suppleirs; within 30 days of invoice for Gas)  pursuant to “prompt pay” statutes.

Note, however, that the applicability and enforceability of pay when paid and pay if paid provisions apply equally to public projects, as well, so the other heightened regulations is not an excuse to not be diligent with respect to reviewing contracts. While no Hawaii courts have specifically addressed the issue of pay if paid clauses on public projects, Hawaii statutes seem to specifically allow for the enforcement of pay-if-paid clauses in HRS Sec. 444-25, which states: “If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor’s solicitation of bids.”

It’s important for everyone on a construction project to treat one another fairly. But, when it comes to signing construction contracts in Hawaii, exchanging payment applications, and eventually, making or receiving payment . . . it’s important to know the rules of the game.  This page provides a resource to you to really understand those rules.

Payment Applications & Payment Terms FAQs in Hawaii

The construction payment process is highly regulated in Hawaii. It can be confusing to figure out when payments must be made, how to make them, and how to best protect your company from expensive problems. Here are some frequently asked questions that come up with the payment application and payment process on Hawaii jobs.

Hawaii Payment Terms & Payment Applications FAQs

What Happens If I Sign a Contract With a "No-Lien" Clause

You might be out of luck.

A lien is only specifically applicable to the collection of a debt (from parties who wouldn’t necessarily otherwise be obligated to pay), it doesn’t have any bearing on whether a debt actually exists or whether a contracting arty is obligated to pay. But, losing the ability to secure payment through a lien claim can dramatically decrease the ability to recover payment in some situations.

As noted above, a lien can obligate parties other than the directly contracting party, and can even allow recovery through the property itself. n situations where a party who is supposed to pay goes bankrupt, or experiences cash-flow issues, a lien can be the best bet for making sure payment is made.

Since Hawaii allows parties to waive lien rights in a contract prior to work, it is imperative that participants review their contracts and sign only after understanding what they contain.

Can I Waive Rights Other than Lien Rights through a Lien Waiver?

Yes. Hawaii doesn’t regulate lien waiver forms. This means that a lien waiver can include whatever terms the parties want to have it include (as long as the terms are otherwise allowable in contracts). Parties in Hawaii must be careful to make sure that they understand what rights they are giving up when delivering a lien waiver, and take care to make sure that only the rights they intend to waive are included in the waiver.

Additionally, Hawaii doesn’t regulate the timing of lien waivers, so a waiver can be effective whenever presented, even if included in a contract prior to work.

Can I Waive or Modify My Rights to Payment through Contract?

Yes, to a certain extent.

Hawaii is fairly lenient with respect to allowing construction participants to dictate payment terms through their own contracts. While, generally, the ability to control payment terms through contract doesn’t modify the existence of the debt itself, the terms can have a big impact on payment. Having control over many of the payment terms means that a construction contract in Hawaii can make it take longer or be more difficult to recover amounts owed.

Hawaii doesn’t regulate the content or timing of lien waivers, so participants on a construction project in Hawaii can find themselves without the ability to secure the amount owed to them through a mechanics lien. This can have significant impact on payment, especially when the party who should be paying runs into financial difficulties or even declares bankruptcy.

Additionally, Hawaii allows parties to determine that payment to the party above them on the payment chain is a condition precedent to their own payment. This means that the right to payment can be completely barred if payment is not forthcoming from higher on the payment chain. While no Hawaii courts have specifically addressed this issue, Hawaii statute HRS Sec. 444-25 states that: “If payment is contingent upon receipt of funds, the contractor shall clearly state this fact in the contractor’s solicitation of bids.”

When Must Retainage be Released on a Project?

It depends.

On private jobs, Hawaii does not regulate retainage in either amount or time for release.

On public jobs retainage is only partially regulated with resect to when it must be released. Once a project is 50% complete, the public entity may release any retain age amount previously held – but this is not mandated.

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Free Hawaii Payment Documents

Getting paid and making payment on Hawaii construction projects requires a lot of details, and can take a lot of documents. You may need specific pay applications, notices, demand letters, certified payroll records, lien waivers, and more. Levelset’s payment application forms and other payment documents are prepared and curated by construction attorneys and payment experts, and available to you for free.

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