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ARTICLE · 16 DECEMBER 2022

‘Pay When Paid' Clauses Do Not Work – Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5

Vincent Young
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A ‘pay when paid' provision is one where the release of retention under a subcontract is dependent on the operation of a clause of the head contract.

AustraliaReal Estate and Construction
Brett Vincent
Brett Vincent

What exactly is a 'pay when paid' provision?

A 'pay when paid' provision is one where the release of retention under a subcontract is dependent on the operation of a clause of the head contract.

Under s 12 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOPA) , a 'pay when paid' provision is unlawful and so void.

The High Court decision in Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 has reinforced the Court's application of s 12 of SOPA to 'pay when paid' provisions.

Background

Maxcon Constructions Pty Ltd (Head Contractor) entered into a subcontract agreement with Mr Vadasz (Subcontractor). The release of the Subcontract security was dependent on practical completion under the terms of the head contract.

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