On commercial work a subcontractor's payment is frequently tied to the main contractor being paid first. Two clauses do this and they are not the same.
Pay-when-paid
Payment is delayed until the contractor is paid, but the obligation stands. If the money never arrives, the subcontractor is still owed — eventually.
Courts in most places read it as a timing provision rather than a condition.
Pay-if-paid
Payment is conditional on the contractor being paid. If the owner never pays, the obligation can disappear entirely, and the subcontractor carries the loss for work performed.
This shifts the credit risk of the property owner onto a business with no relationship to them and no way to assess them. Enforceability varies by state and some refuse it outright, but where it holds it is severe.
Why it matters before signing
The difference is a few words and the consequence is whether the business can be left unpaid for completed work. It is worth identifying in any commercial contract, and it is negotiable more often than it is negotiated.
What protects against it
Lien rights, which run against the property rather than the contractor and are generally not extinguished by these clauses — though preserving them requires acting inside short statutory deadlines, and notices at the start of the job.
Knowing who the owner is and whether the project is financed, which is the credit risk actually being taken.
Not accumulating exposure. Continuing to work while earlier stages are unpaid multiplies it — see reducing bad debt.
Liquidated damages
The other clause worth finding: a stated amount payable per day of delay. It is enforceable where it is a genuine estimate of loss rather than a penalty, and it can exceed the value of the work.
Where this sits
These are the terms that make commercial work different from residential, and they are the reason commercial work needs more cash behind it.