In a pay-when-paid clause, when are the consultants paid?

• A. The owner is required to pay consultants within 15 days of invoicing, regardless of owner payments.
• B. Consultants will be paid when payments are received by the owner.
• C. Consultants are paid upfront before owner payments are collected.
• D. The owner's payments are guaranteed to flow to consultants within 30 days.

Answer: (B)

In a pay-when-paid arrangement, the timing of the consultant’s payment is directly tied to the owner’s actual payment to the contractor. The consultant is paid only after the owner actually pays the contractor, not before and not necessarily on a fixed date independent of owner funds. This structure protects the party funding the work from cash-flow risk but shifts that risk to the consultant.

So, the consultants are paid when payments are received by the owner. This is different from being paid upfront or on a guaranteed schedule regardless of owner payments, and it means any delay in the owner’s payment delays the consultant’s payment as well.