John Bleasby's latest Legal Notes column is about blending ‘pay when paid’ clauses with prompt payment regimes.
Looking west to Alberta’s prompt payment regime , Preet Saini, Michael Briggs and Jamieson Virgin of McMillan LLP,while Alberta originally did away with such clauses and deemed them as having “no force or effect,” that prohibition was removed prior to enactment.
“The laws in Ontario and Alberta appear to be somewhat similar with respect to this issue,” says Lynde. “While pay when paid clauses are technically valid and enforceable in Ontario, such clauses will need to be drafted to comply with the Construction Act, and as set out in the case law, must be clear and unambiguous if a contractor wishes to rely upon it as a true condition precedent in support of non-payment to the subcontractor.
The second case from Nova Scotia confirmed how the pay when paid clause “informed the timing of the payment, but was not conclusive as to the right to be paid. Thus, the clause was considered a timing mechanism only, and did not operate to preclude claims by a subcontractor with respect to payment.” In that way, when it comes to adjudication and the issuance of non-payment notices, Lynde says the act is more procedural than substantive in nature.
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