What happens to subcontractors when owners can’t pay their general contractors? If their subcontracts have “pay-if-paid” provisions, the subcontractors may be out of luck. Those provisions mean that if the general does not get paid, it does not have to pay its subcontractors. While there are a number of courts in other states that have declared pay-if-paid clauses to be unenforceable, that is not presently the rule in Colorado.
The last time the Colorado Supreme Court addressed the question, it suggested that pay-if-paid provisions would be enforceable in Colorado if (1) they clearly state that payment to the general contractor is a condition precedent to payment to the subcontractor, and (2) the language clearly provides that the subcontractor bears the risk of non-payment by the owner.