"Understanding the "Pay When Paid" Clause"

1. “Pay when Paid” clauses protect contracting parties from paying subcontractors and suppliers if they have not been paid by their own upstream contracting party.
2. Florida law provides for two types of construction payment bonds: standard payment bond and conditional payment bond.
3. A conditional payment bond prevents claims against the bond in the event of nonpayment if the contract has a valid pay when paid clause.
4. To comply with Section 713.245, Florida Statutes, a conditional payment bond must be listed on the Notice of Commencement and include specific language on the front page.
5. The construction lien law provides protection to both owners and contractors, and strict compliance with the law is necessary.

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