---
title: "Pay-if-paid vs pay-when-paid clauses in Texas subcontracts | TapeAndFloat"
url: https://tapeandfloat.com/blog/pay-if-paid-vs-pay-when-paid-texas.html
language: en
author: James Grokman, CEO, TapeAndFloat
updated: 2026-10-28
---

Blog · By [James Grokman](https://tapeandfloat.com/about.html), CEO, TapeAndFloat · Published October 28, 2026 · Updated October 28, 2026

# Pay-if-paid vs pay-when-paid clauses in Texas subcontracts

**A pay-if-paid clause makes the GC's receipt of the owner's payment a condition before the GC owes you anything, while a pay-when-paid clause only sets *when* you get paid. Texas calls the pay-if-paid kind a "contingent payment clause" and limits when a GC can use it (Business and Commerce Code [§§ 56.051-56.055](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.051)), but those limits do not apply to a subcontract solely for a detached single-family home, duplex, triplex or fourplex ([§ 56.002](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.002)).**

**So read the payment clause before you sign, not after a pay app goes unpaid. Mark which kind it is, ask the GC for the owner and financing information in writing, and keep your lien notice dates on the calendar either way, because a pay-if-paid clause cannot be used to knock out a valid Texas mechanic's lien (§ 56.055).**

**Not legal advice. Check with an attorney.** This is a general guide for office staff on Texas jobs. Whether a clause is pay-if-paid or pay-when-paid depends on its exact words, and courts read them case by case. Read the statutes linked below and have a Texas construction attorney review your subcontract.

## 1. The two clauses in plain English

**Pay-if-paid** means the GC only has to pay you *if* the owner pays the GC. Chapter 56 defines a "contingent payment clause" as one that makes the payor's receipt of payment from someone else "a condition precedent" to its obligation to pay you ([§ 56.001(2)](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.001)). In the statute, the GC is the "contingent payor" and you are the "contingent payee."

**Pay-when-paid** is about timing. The GC pays you a set time after it gets paid, but the payment itself is not supposed to depend on the owner paying. Chapter 56 says it does not affect a provision about the timing of payment as long as the payment is to be made within a reasonable period ([§ 56.003](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.003)).

Watch for the words. "Receipt of payment by Contractor from Owner is a condition precedent to payment to Subcontractor" reads like pay-if-paid. "Contractor will pay Subcontractor within 10 days after Contractor receives payment" reads like pay-when-paid. Both lines are made-up examples, not from any real contract, and the full contract can change how a clause is read.

## 2. Does Chapter 56 cover your job?

Chapter 56 does not apply to a contract that is solely for:

* design services;
* roads, highways, streets, bridges, utilities, water supply, water or wastewater plants and lines, wharves, docks, airport runways, drainage and similar civil engineering projects; or
* work on a detached single-family home, duplex, triplex or quadruplex (§ 56.002).

That last one matters for drywall. On a subcontract only for houses up to four units, the Chapter 56 limits below do not apply, so a pay-if-paid clause deserves an even closer look before you sign. On apartments, offices, retail, schools and other commercial work, the limits apply, and nobody can waive them by contract; a purported waiver is void ([§ 56.004](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.004)).

## 3. Five limits on pay-if-paid in Texas

1. **The GC caused the nonpayment.** The GC (or its surety) cannot enforce the clause to the extent the owner didn't pay because the GC didn't meet its own contract obligations, unless the nonpayment comes from your failure to meet yours ([§ 56.051](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.051)).
2. **You sent a written objection.** After the 45th day after you submit a written payment request that substantially follows your contract's requirements for a regular pay app or invoice, you may send the GC written notice objecting to further enforcement of the clause. It covers work performed or materials delivered after the notice takes effect ([§ 56.052(a)](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.052)). On a private job under Property Code Chapter 28, it takes effect on the later of the 10th day after the GC receives it or the 8th day after interest starts to run against the owner under [§ 28.004](https://statutes.capitol.texas.gov/Docs/PR/htm/PR.28.htm#28.004). Public jobs use different interest rules (§ 56.052(b)).
3. **A sham relationship.** The clause cannot be enforced if the GC and the owner are in a sham relationship as described in Property Code [§ 53.026](https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm#53.026) ([§ 56.053](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.053)).
4. **Unconscionable enforcement.** The GC can't enforce the clause if enforcement would be unconscionable, but whoever claims that has to prove it ([§ 56.054(a)](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.054)). Enforcement is *not* unconscionable if, before the subcontract became enforceable against you, the GC was diligent about checking the owner's finances and told you about them in writing, and it either made reasonable efforts to collect or offered to assign you its claim against the owner (§ 56.054(b)).
5. **Your lien.** A contingent payment clause may not be used as a basis to invalidate the enforceability or perfection of a mechanic's lien under Property Code Chapter 53 ([§ 56.055](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.055)).

The § 56.052 notice has exceptions. It does not stop enforcement if the owner has a dispute because you didn't meet your contract requirements and the GC tells you so in writing on time (§ 56.052(c)), or in some public jobs where sovereign immunity blocks collection (§ 56.052(d)). Once you are paid the unpaid amount behind the notice, the clause applies again to work after that payment (§ 56.052(e)). Have an attorney draft or review the notice.

## 4. Before you sign: the information to ask for

On a private job covered by Chapter 53, the GC is treated as diligent under § 56.054(b)(1) if it gives you, in writing ([§ 56.054(d)](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm#56.054)):

* the owner's name, address and business phone number;
* a legal description of the property;
* the name and address of the surety on any payment bond, where claim notices go;
* if there is a construction loan: the loan amount, a summary of its terms, whether the owner is in foreseeable default, and the borrowers' and lenders' names, addresses and phone numbers;
* if there is no loan, or it is not enough: the amount, source and location of the funds to pay the rest of the contract.

Asking for this before you sign is a good office habit anyway. The owner's name and address go on your lien notices, and the loan details tell you whether the job is funded. Save the GC's answer and the date you got it with the subcontract.

## 5. During the job: a simple routine

1. Flag every subcontract as pay-if-paid, pay-when-paid or neither, and whether it is a 1-4 family home job.
2. For each pay app, write down the date you submitted it and the date 45 days later.
3. When a pay app is still unpaid past that date on a pay-if-paid job, ask your attorney about sending the § 56.052 notice before you keep working.
4. Keep the Texas lien notice date next to every unpaid pay app. Our [Texas lien deadline calculator](https://tapeandfloat.com/texas-lien-deadline-calculator.html) gives the dates, and the [past-due pay app scripts](https://tapeandfloat.com/blog/past-due-pay-app-collection-scripts.html) help you follow up politely.

```
Job / GC ................ Example Office Building / Example GC
Clause .................. pay-if-paid, ch. 56 applies (commercial)
Owner info in writing ... received Mar 3 (saved with subcontract)
Pay app # / sent ........ 5 / Apr 1 (made-up numbers)
Day 45 .................. May 16
Lien notice date ........ on the calendar (see calculator)
Status .................. open, attorney asked about notice
```

TapeAndFloat is an office assistant for drywall subs and small GCs. During the free pilot it flags pay apps that are past their expected pay date and keeps the lien notice dates next to them, and a real person on your team reviews every entry and follow-up. If that would help your office, [take a look at the Austin pilot](https://tapeandfloat.com/office-assistant.html#pilot).

## Official sources

* [Texas Business and Commerce Code, Chapter 56: Agreement for Payment of Construction Subcontractor](https://statutes.capitol.texas.gov/Docs/BC/htm/BC.56.htm) (§§ 56.001, 56.002, 56.003, 56.004, 56.051, 56.052, 56.053, 56.054, 56.055, 56.056, 56.057)
* [Texas Property Code, Chapter 28: Prompt Payment to Contractors and Subcontractors](https://statutes.capitol.texas.gov/Docs/PR/htm/PR.28.htm) (§ 28.004)
* [Texas Property Code, Chapter 53: Mechanic's Lien](https://statutes.capitol.texas.gov/Docs/PR/htm/PR.53.htm) (§ 53.026)

Related: [polite collection scripts for a past-due pay app](https://tapeandfloat.com/blog/past-due-pay-app-collection-scripts.html), [how to fill out a drywall pay application in Texas](https://tapeandfloat.com/blog/drywall-pay-application-texas.html), [Texas lien deadlines for subcontractors](https://tapeandfloat.com/blog/texas-lien-deadlines-subcontractors.html) and the glossary entry [pay-when-paid vs. pay-if-paid](https://tapeandfloat.com/glossary/pay-when-paid.html).

**Not legal advice.** General summary as of October 28, 2026. Check specific jobs and contracts with a Texas construction attorney.

## Frequently asked questions

### What is the difference between pay-if-paid and pay-when-paid?

Pay-if-paid makes the GC's receipt of the owner's payment a condition before it owes you; Texas calls it a contingent payment clause (Bus. & Com. Code Sec. 56.001). Pay-when-paid only sets the timing, and ch. 56 leaves timing terms alone if payment is due within a reasonable period (Sec. 56.003).

### Are pay-if-paid clauses enforceable in Texas?

They can be, with limits. The GC cannot enforce one when its own breach caused the nonpayment, after your timely written objection, in a sham relationship or when unconscionable (Secs. 56.051-56.054). These limits do not apply to subcontracts solely for 1-4 family homes (Sec. 56.002). Not legal advice.

### How do I object to a pay-if-paid clause?

After the 45th day after you submit a written payment request, you may send the GC written notice objecting to further enforcement. It covers work done after the notice takes effect, which on private jobs is the later of 10 days after receipt or 8 days after owner interest starts under Property Code Sec. 28.004 (Sec. 56.052).

### Can a pay-if-paid clause take away my lien rights?

No. Under Sec. 56.055 a contingent payment clause may not be used to invalidate the enforceability or perfection of a Texas mechanic's lien. You still have to meet the Chapter 53 notice and filing deadlines.