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

Agency pays you only after its client pays? Understand pay-when-paid versus pay-if-paid, why 120-day waits hurt and how to cap the delay with a fixed date.

The risky clause

Agency will pay Subcontractor within 15 days after Agency receives payment from the end client, which may take up to 120 days.

Why it is dangerous

Pay-when-paid delays your invoice until the client pays the agency. Pay-if-paid means you are never paid if the client never pays, which moves the agency's credit risk onto you. Insist on a fixed outside date, such as 45 days from invoice. If you are Udyam-registered in India, the MSMED Act payment rules may apply, so ask a CA. This is general information, not legal advice.

Safer clause to propose

Subcontractor invoices are due within 30 days of invoice date whether or not Agency has been paid by its client. Agency bears its own client credit risk.

Message to send

Hi [Agency],

Could we set a fixed payment date of 30 days from invoice, regardless of when your client pays? I am happy to discuss milestones if your cashflow needs it. Thanks, [Your Name]

Frequently asked questions

Is pay-when-paid fair for subcontractors?

It can be if there is a short outside date. Without one, you wait on a third party you do not control.

What is a pay-if-paid clause?

A clause making the agency's payment conditional on its client paying. It transfers non-payment risk to you.

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