Home>Levelset Community>Legal Help>What is the law in Kentucky when a contractor from out of state has in the contract that he doesn’t have to pay until he’s paid. If he’s not paid can the subcontractor sue the contractor for payment?

What is the law in Kentucky when a contractor from out of state has in the contract that he doesn’t have to pay until he’s paid. If he’s not paid can the subcontractor sue the contractor for payment?

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We did a job for a contractor from Missouri in Cynthiana, Ky. A disagreement with the contractor and owner of the property has held up my final payment of $68,000 dollars. Our contract says the contractor doesn’t have to pay us until he’s paid which is way overdue. Can we sue the contractor for payment ?

1 reply

Jan 3, 2019

That's a good question. I believe you're referring to a "Pay-when-paid" contract. When a pay-when-paid contract is in play, the obligation to make payment is shifted in time - the party responsible for making payment ("higher-tiered party") will generally not be required to make that payment until they receive payment themselves. However, this is only a "time shifting" device - meaning, payment will eventually be required, regardless of whether the payment is ever made to the higher-tiered party. zlien discusses that topic here: Pay If Paid or Pay When Paid: What’s the Difference, and Why Does it Matter? Each state handles these types of provisions differently. In Kentucky, a pay-when-paid clause will shift the time for payment within a reasonable time. But, eventually, payment must be made even if the paying party has gone unpaid. Changing gears, there are a number of different tools that might be available to help recover payment. For one, when construction payments are owed but unpaid, the strongest remedy available will typically be a mechanics lien. zlien discusses the many ways a mechanics lien can force payment in this article, but on a basic level, a mechanics lien will help put pressure on both the property owner and the general contractor to make payment. Keep in mind, though, that there are strict time and notice requirements associated with mechanics liens, and you can learn more about those here: Kentucky Lien & Notice FAQs. Because this is such a powerful tool, the mere threat of a lien can compel payment - and sending a document such as a Notice of Intent to Lien can go a long way toward getting paid. Finally, if a lien claim wouldn't be appropriate, other options for recovery are available. This includes, potentially, filing a lawsuit against the nonpaying party for breach of contract, unjust enrichment, under prompt payment laws, or some other theory of recovery. Note, though, that litigation can be both costly and risky, and depending on the timeframes involved, there's a chance that the contractor has not yet become responsible for making payment under a valid pay-when-paid provision (if one is in play).

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