Research On Terms Of ‘Pay If Paid’ In Construction Contracts

In the field of construction in China,when the general contractor signs the construction project subcontract with the subcontractor,it is often agreed that the development unit has paid the general contractor serves as the condition for the general contractor to fulfill the obligation of paying the subcontractor.This kind of clause has a specific term in the field of construction,that is "pay if paid" clause."Pay if paid" clause is not first used in the field of construction in China.It first appeared in the subcontract model of the International Federation of Consulting Engineers,and then gradually formed a generally accepted industrial practice through the continuous absorption and correction by Chinese construction market.However,in judicial practice,since the "pay if paid" clause is still in the blank of legislation in our country,when hearing cases involving "pay if paid" clause,the court often relies on the specific terms of the contract signed by all parties,and achieves the purpose of coordinating the rights and obligations of all parties by allocating the burden of proof.But due to the complicated forms of "pay if paid" clause,it is difficult to form a unified judicial standard.BY searching and interpreting the cases involving "pay if paid" clauses,we can find that there are gigantic disputes about the nature and effectiveness of "pay if paid" clauses in judicial practice.There are mainly two views on the nature of "pay if paid" clause.According to the conditional theory,the "pay if paid" clause belongs to the conditional clause,which means that the fact that the development unit has paid the project funds to the general contractor serves as the condition for the general contractor to pay the subcontractor.On the other hand,according to the theory of term attachment,"pay if paid" clause belongs to term attach clause.The main reason is that the payment of the development unit is not a uncertain fact.The general contractor will eventually be able to obtain the project funds by judicial auction.This paper will compare these two views.There are mainly four views on the effect of "pay if paid" clause.The validity theory holds that the clause is valid because the "pay if paid" clause belongs to the scope of party autonomy.And the "pay if paid" clause does not conform to the provisions on invalidity of our country.The theory of invalid defense holds that the "pay if paid" clause is not capble of protecting the general contractor.The reason is that it is against the principle of relativity of the contract to take the project payment paid by the development unit to the general contractor as the condition for the general contractor to pay the project funds to the subcontractor.And it has the tendency of violating the principle of fairness.The other theory that the clause is effective in principle is partially in favor of the effective theory.This view holds that the "pay if paid" clause should be valid in principle,but if any of the parties maliciously use the "pay if paid" clause to evade their payment obligations,then the "pay if paid" clause should be inadequate to protect the parties.The last one holds that the clause shall be revocable.This view holds that the "pay if paid" clause is revocable because it is obviously unfair.This paper intends to discuss these four viewpoints.Finally,this paper will also discuss how to make good use of the "pay if paid" clause in order to maximize their own interests.It mainly includes four parts: how to choose the subject to claim,action of subrogation,matters of "pay if paid" clause that require attention,and relief ways under special circumstances.Among them,the relief ways in special cases mainly include seven parts ranging from the development unit’s refusal to pay due to the general contractor’s violation of the general contract,the general contractor’s collusion with the development unit,the development unit’s inability to pay,the development unit’s laziness in performing its obligations,the general contractor’s laziness in requiring the development unit to pay the funds,the general contractor’s refusal to pay the funds after receiving the development unit’s payment to the subcontractor’s failure to pay migrant workers’ wages.