In Georgia, a pay-if-paid clause is enforceable when the subcontract clearly makes owner payment a condition of your payment, and any lien or bond waiver signed before you furnish labor or materials is void. Parisi Law Firm drafts and reviews construction contracts and subcontracts for Northeast Georgia trades. Call (404) 594-5130 for a consultation.
A construction contract isn't a standard business agreement with a few trade terms added. It controls cash flow on a job where you front labor, materials, and equipment for weeks before a dollar comes back. One sentence in a subcontract can decide whether you get paid when the general contractor gets paid, or only if the owner ever pays at all. For general contract drafting outside construction, see our contracts page; this page covers the terms that matter on the jobsite.
Jerry Parisi works with general contractors, subcontractors, and suppliers across Jefferson, Jackson County, and Northeast Georgia. We write contracts for your company to use on every job, and we review the owner's or GC's paper before you sign it.
Payment terms and the Georgia Prompt Pay Act
The Georgia Prompt Pay Act (O.C.G.A. § 13-11-1 and following) sets default payment timing. The owner pays the contractor within 15 days of receiving a payment request for work performed under the contract. The contractor pays each subcontractor, and each sub pays its own subs, within 10 days of receiving payment for that work. 'Receipt' means actual funds in the bank account. Suppliers count as subcontractors under the Act.
Those are defaults, not fixed rules. Under O.C.G.A. § 13-11-7(b), the parties can agree by contract to different payment periods, interest rates, and terms, and the contract then controls. Whatever your payment clause says usually replaces the statute.
- Late-payment interest under the Act is 1% per month, but only if the party being charged was told about that provision when payment was requested. Accepting the payment releases the interest claim.
- If a party willfully breaches the contract's payment-timing terms, the statutory interest rate applies again.
- The prevailing party in an action under the Act, on either side, can recover reasonable attorney's fees (O.C.G.A. § 13-11-8).
- The Act lists permitted reasons to withhold payment, such as defective work not yet fixed, disputed work, unsatisfactory progress, and failure to pay your own labor and suppliers (O.C.G.A. § 13-11-5).
- The Act does not apply to residential projects of 12 or fewer units (O.C.G.A. § 13-11-10), so single-family and small multifamily work runs on the contract alone.
- The Act gives no statutory right to stop work for nonpayment. If you want that right, it has to be written into your contract.
Pay-if-paid vs. pay-when-paid
This is the clause subcontractors ask about most. In Sasser & Co. v. Griffin (1974), the Georgia Court of Appeals held that a subcontract can make the owner's payment a condition precedent to the subcontractor's right to be paid, if the subcontract contains an express condition clearly showing that was the parties' intent. The language 'payments will be made from money received from the owner only' met that standard.
In practice, that puts the wording on trial. A true pay-if-paid clause shifts the risk of owner nonpayment to the sub. A clause that only talks about when payment is due, without clearly making owner payment a condition, gives the sub a much stronger argument that it's owed payment either way. If you're a GC, we draft the language you intend. If you're a sub, we flag it and negotiate. In Sasser itself, the court treated the subcontractor's lien against the owner's property separately from the payment clause.
Lien and bond waivers you can't sign away in advance
Some subcontracts bury a sentence where you give up your lien or payment-bond rights up front. Georgia law voids any waiver of lien or payment-bond rights signed before you furnish labor, services, or materials (O.C.G.A. § 44-14-366(b)). That protection is about lien and bond rights specifically; it doesn't erase the rest of the contract, and it doesn't cancel a pay-if-paid clause. Waivers signed later, in exchange for payment, are a separate issue with their own rules, covered on our lien waivers page.
Indemnity and Georgia's anti-indemnity statute
Indemnity clauses decide who pays when someone gets hurt or property gets damaged. Under O.C.G.A. § 13-8-2(b), a promise in a construction contract to indemnify, hold harmless, insure, or defend the other party against claims for bodily injury, death, or property damage caused by that other party's sole negligence is void and unenforceable.
Two carve-outs matter. The statute does not affect workers' compensation obligations, and it does not apply to a requirement to buy a project-specific insurance policy, such as builder's risk or an owner- or contractor-controlled insurance program. Broad-form indemnity language that reaches past sole negligence is where the drafting fights happen, so we read these clauses alongside your insurance requirements, not in isolation.
Retainage, change orders, and scope
- Private-work retainage: the Prompt Pay Act sets no percentage cap. The owner can't hold more than the percentage in the prime contract, and a sub's retainage can't exceed what the owner holds on that sub's work (O.C.G.A. § 13-11-5).
- Retainage release: the contractor passes retainage through to a sub within 10 days of receiving it, once the sub's work is 50% complete, including approved change orders, and proceeding satisfactorily (O.C.G.A. § 13-11-6).
- Public-work retainage: for public contracts entered into on or after July 1, 2022, retainage is capped at 5% of each progress payment. Contracts of $250,000 or less, or 45 days or less, are exempt (O.C.G.A. § 13-10-80).
- Change orders: require them in writing, signed before the extra work starts, with price and schedule impact stated.
- Scope and exclusions: spell out what's included, what isn't, who supplies what, and what happens when site conditions differ from the drawings.
Delays, warranties, and how long claims last
Delay clauses should say how time extensions are requested, what notice is required and when, who carries weather and owner-caused delays, and whether a daily liquidated damages figure applies and how it was set. Warranty terms should state the warranty period, what it covers, and what the remedy is.
Georgia allows six years to sue on a written contract, counted from when the claim becomes due and payable (O.C.G.A. § 9-3-24). Contracts for the sale of goods follow a different rule. Separately, Georgia's construction statute of repose bars most deficiency claims against designers and builders more than eight years after substantial completion (O.C.G.A. § 9-3-51). Since a 2020 amendment, that repose statute does not apply to actions for breach of contract, including breach of express contractual warranties (O.C.G.A. § 9-3-51(c)).
Dispute-resolution clauses
Your contract decides whether a dispute goes to court, mediation, or arbitration, and where. Under the Georgia Arbitration Code, a written agreement to arbitrate future disputes is enforceable (O.C.G.A. § 9-9-3), and the Code expressly applies to construction contracts and construction warranty contracts (O.C.G.A. § 9-9-2(b)).
The Code also has exclusions in O.C.G.A. § 9-9-2(c), including one for consumer transactions. A homeowner's residential construction or remodel contract may fall into that category, although the Federal Arbitration Act may still reach a contract involving interstate commerce. If you work for homeowners, have your arbitration clause checked rather than assuming it will hold. Our construction mediation and arbitration page covers how these processes run once a dispute starts.
Contract clause checklist: what to watch for
| Clause | What to watch for |
|---|---|
| Payment timing | Prompt Pay Act defaults (15 days owner to contractor, 10 days down the chain) apply unless the contract sets different terms |
| Pay-if-paid | Enforceable if it clearly makes owner payment a condition of yours (Sasser, 1974); ambiguous wording helps the sub |
| Advance lien or bond waiver | Void if signed before you furnish labor or materials (O.C.G.A. § 44-14-366(b)) |
| Indemnity | Void to the extent it covers the other party's sole negligence (O.C.G.A. § 13-8-2(b)); check insurance carve-outs |
| Retainage | Private: no statutory cap, contract controls. Public (contracts from July 1, 2022): 5% max, with exemptions |
| Stop-work right | Not provided by the Prompt Pay Act; must be written into the contract |
| Warranty and claims period | 6 years on written contracts (O.C.G.A. § 9-3-24); 8-year repose for deficiency claims, but not contract or express-warranty claims |
| Arbitration | Enforceable (O.C.G.A. § 9-9-3), but check the § 9-9-2(c) exclusions, especially for homeowner contracts |
Frequently Asked Questions
Are pay-if-paid clauses enforceable in Georgia?
Yes, if clearly written. In Sasser & Co. v. Griffin (1974), the Georgia Court of Appeals held that a subcontract can make owner payment a condition precedent to the sub's payment when it contains an express condition clearly showing that intent. Vague or timing-only language is weaker. Have the exact wording reviewed before you sign.
What's the difference between pay-if-paid and pay-when-paid?
A pay-if-paid clause makes the owner's payment a condition of your payment, shifting nonpayment risk to you. A pay-when-paid clause addresses timing. Under Sasser, owner payment is a condition only when the subcontract clearly says so, which is why the precise words in your subcontract matter more than the label.
Can a subcontract make me waive my lien rights?
Not in advance. Georgia law voids any waiver of lien or payment-bond rights signed before you furnish labor, services, or materials (O.C.G.A. § 44-14-366(b)). Waivers signed later in exchange for payment are different and can be binding, so read every waiver form before signing it.
How fast does a general contractor have to pay a subcontractor in Georgia?
Under the Georgia Prompt Pay Act, within 10 days of the contractor's receipt of payment for the sub's work, if the sub has performed and met the contract's conditions. The parties can agree to different terms by contract, and the Act doesn't cover residential projects of 12 or fewer units.
Is it legal for a contract to make me cover the GC's negligence?
Not for the GC's sole negligence. O.C.G.A. § 13-8-2(b) voids construction-contract promises to indemnify, hold harmless, insure, or defend another party against injury or property-damage claims caused solely by that party's negligence. Workers' compensation and project-specific insurance requirements are carved out, so review indemnity and insurance terms together.
Is there a cap on retainage in Georgia?
On private work, the Prompt Pay Act sets no percentage cap; the prime contract controls, and a sub's retainage can't exceed what the owner holds on that sub's work. On public contracts entered into on or after July 1, 2022, retainage is capped at 5%, with exemptions for contracts of $250,000 or less or 45 days or less.
How long do I have to sue over a breached construction contract?
Georgia allows six years on a written contract, counted from when the claim becomes due and payable (O.C.G.A. § 9-3-24). The eight-year construction statute of repose does not apply to breach of contract or express warranty claims since a 2020 amendment. Other claims may have different deadlines, so get advice early.
Should my construction contract require arbitration?
It can. Georgia enforces written arbitration agreements (O.C.G.A. § 9-9-3), and the Arbitration Code expressly covers construction contracts. But § 9-9-2(c) excludes certain contracts, including consumer transactions, which may reach homeowner remodel work. Whether arbitration, mediation, or court fits your business is worth discussing before you adopt a standard clause.