Understanding "Pay if Paid" Clauses: PSED Law Advises Michigan Contractors on Evolving Landscape

ANN ARBOR, Mich. - June 16, 2025 - PRLog -- With the growing use of conditional payment clauses in Michigan's private construction contracts, Pear Sperling Eggan & Daniels, P.C. is advising contractors and subcontractors to carefully review their agreements. Commonly known as "pay if paid" or "pay when paid" clauses, these provisions can significantly affect when and whether a subcontractor gets paid.

Under Michigan case law, such clauses are generally enforceable—but only if they include clear and unambiguous language making the contractor's receipt of payment a condition precedent. Court decisions, such as Berkel & Company Contractors v Christman Co, underscore the courts' strict interpretation of contract language.

Adding further urgency, Michigan legislators have introduced House Bill 4837, which would ban "pay if paid" clauses and impose stiff penalties on delayed payments in private construction projects. The bill remains under review but could soon change industry standards.

"Subcontractors and contractors alike must understand their rights under existing law—and be prepared for potential changes," said Matt Jane, construction lawyer at Pear Sperling Eggan & Daniels, P.C. "We encourage construction professionals to consult with legal counsel before signing or enforcing any payment provision."

For legal assistance with construction contracts or payment disputes, contact Ann Arbor construction lawyers (https://www.psedlaw.com/learn/more/conditional-payment-cl...) at Pear Sperling Eggan & Daniels, P.C. at (734) 665-4441 or visit PSEDLaw.com (https://www.psedlaw.com/).

About Pear Sperling Eggan & Daniels, P.C.: Pear Sperling Eggan & Daniels, P.C. is one of the oldest law firms in Washtenaw County, Michigan. Founded in 1948, Pear Sperling has adapted with the ever-changing needs of clients and flourished into a well-respected and successful law firm, trusted by clients, judges and other attorneys. Top Rated Michigan Superlawyers^®, AV^® rated, and their attorneys are held to the highest rating possible based on peer review. https://www.psedlaw.com