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A General Contractor's 'Pay When Paid' Clause

January 20, 2022

Alberta

,

Canada

Issue

Are clauses providing that a subcontractor will be paid only when the contractor is paid by the customer enforceable?

Conclusion

No Alberta cases were identified where the Court considered when a "pay when paid" clause is enforceable. Guidance may be gleaned from the jurisprudence in other provinces.

A “pay when paid” clause will be upheld where the clause is clear, unambiguous and enforceable and the subcontractor knew and accepted the risk. (6157734 Canada Inc. v Bluelime Enterprises Inc.)

Pursuant to an American line of cases which has been followed by the Nova Scotia Court of Appeal:

(1) Absent a clear expression to the contrary, a contractual provision that payment is not due to the subcontractor until the owner has been paid by the general contractor does not establish a condition precedent for payment, but merely fixes time for payment to the subcontractor; and,

(2) In order for a general contractor to impose a term on its subcontractor that payment for the subcontractor’s work is conditional on the contractor itself being paid by the owner, the contractor must use clear language indicating its intention in that regard to alert the subcontractor that the payment to it is conditional on the owner paying the general contractor. (Arnoldin Construction & Forms Ltd. v. Alta Surety Company)

In Dirm 2010 Inc. v. Abraam Construction Inc., the contractor argued that the subcontractor was not entitled to claim interest on that amount or costs of the action based on an oral "pay when paid" agreement. Master Robinson found that the contractor did not have sufficient evidence to prove that there was a verbal "pay when paid" agreement.

Law

No Alberta cases were identified where the Court considered when a "pay when paid" clause is enforceable. Guidance may be gleaned from the jurisprudence in other provinces.

In 6157734 Canada Inc. v Bluelime Enterprises Inc., 2016 ONSC 1794 (CanLII), Justice Thorburn upheld a decision finding a "pay-when-paid" clause to be enforceable. Thorburn observed when a "pay when paid" clause would be enforceable as follows:

[35] A “pay when paid” clause such as Clause 4 of the Agreement will be upheld where the clause is clear, unambiguous and enforceable and the subcontractor knew and accepted the risk. (Timbro Developments v. Grimsby Diesel Motors Inc., 1998 CanLII 2289 (ON CA), [1998] OJ No. 448, 1988 CarswellOnt 733 (OCA).)

[36] In OEB International Inc. v. Leyden 1995 CanLII 7332 (ON SC), [1995] 59 A.C.W.S. (3d) 234 (S.C.J.), the court held that “best efforts” means more than reasonable efforts.

It means taking, in good faith, all reasonable steps to achieve the objective. The meaning of “best efforts “is however, not boundless. It must be approached in the light of the particular contract the parties to it and the contract’s overall purpose as reflected in its language.

[37] Similarly, in Crompton v. Norman Hill Realty [1995] O.J. No. 3407, 1995 CarswellOnt at para 17 (OCJ), the court held that,

The defendants have a duty to the plaintiff to collect the commission if they can and give the plaintiff their share of the commission. They have a duty to make every effort to collect the commissions or to negotiate a reasonable settlement. They cannot waive any right to commission in order to obtain an advantage for themselves which will not be an advantage to the plaintiff.

In Dirm 2010 Inc. v. Abraam Construction Inc., 2021 ONSC 2510 (CanLII), the contractor argued that the subcontractor was not entitled to claim interest on that amount or costs of the action based on an oral "pay when paid" agreement. Master Robinson found that the contractor did not have sufficient evidence to prove that there was a verbal "pay when paid" agreement:

[21] Abraam does not dispute the quantum owing to Dirm of $40,539.00, which it agreed should be paid from the lien security posted into court. Abraam argues that Dirm is not entitled to claim interest on that amount or costs of the action from Abraam based on an oral “pay when paid” agreement reached between the principals of the two corporations. Abraam’s position is that the action was commenced prematurely, that Abraam took reasonable steps to obtain payment from Green Frog, and that, since payment was not made by Green Frog, Abraam has no liability to Dirm for either interest or costs.

[22] As noted above, no case law was tendered by either party on the requirements for an enforceable “pay when paid” agreement. Evidence on whether there was any “pay when paid” agreement is in conflict. Abraam relies on statements by its principal, Joseph Awad, in his two affidavits as supporting a verbal agreement between Mr. Awad and Dirm’s principal, Benny Di Sotto, to a “pay when paid” arrangement. Mr. Di Sotto expressly and unequivocally denies any such agreement, stating, “I can state emphatically that I never had any such discussions with Mr. Awad at any time during, or after, the Project.”

[...]

[34] As the party relying on the existence of a verbal “pay when paid” agreement, it was incumbent on Abraam to put its best evidentiary foot forward in support of that position. Not a single substantiating email or text message was put forward to buttress Joseph Awad’s evidence. Absent any reliable or corroborating evidence of a discussion before the January 2019 meeting, and with the evidence on that meeting tendered in response to Mr. Di Sotto’s affidavit denying any “pay when paid” agreement, I infer that Mr. Awad’s first affidavit was also referring to the same January 2019 meeting. I have already found that the discussion as outlined by Mr. Awad at that meeting does not constitute an agreement.

[35] In any event, I find Benny Di Sotto’s evidence on the lack of any “pay when paid” agreement to be more reliable. In addition to denying any agreement to a “pay when paid” arrangement, Mr. Di Sotto’s evidence is that Dirm’s standard practice is to insist on payment within 30 days after completion of a job with all of its customers. Dirm further points to the express term in Dirm’s accepted quotation to Abraam, which states, “Subject to payment terms net 30 days from date of invoice”. Each of Dirm’s two invoices includes a consistent payment term, stating, “Amount due in 30 days from date of invoice.” Dirm also points to an email on December 17, 2018 (the day prior to preserving Dirm’s lien), sent to Abraam, which attached Dirm’s invoices and requested payment. That is consistent with Mr. Di Sotto’s overall evidence and Dirm’s position that there was no agreement to defer payment until after Abraam was paid by Green Frog.

[36] For these reasons, I find that there was no agreement by Dirm to be paid when Abraam was paid, nor does the evidence support any other legal basis for a finding that Dirm sued prematurely and should be denied interest and costs on the admitted amount of its lien. A trial is not required. In the absence of any “pay when paid” term, Abraam breached the subcontract by failing to pay Dirm. The principal amount owing to Dirm is being paid through the terms of the consent order. Dirm remains entitled to judgment against Abraam for the unpaid interest by reason of Abraam’s breach of the subcontract.

In Metal-Air Mechanical Systems Ltd. v. Ledcor Construction Limited, 2008 CanLII 54961 (ON SC), the Court observed:

[8] The Plaintiff acknowledges the general contractual validity of “pay when paid” clauses. In the case before me, the provision in question reads as follows:

The Contactor (Ledcor) will pay to the Subcontractor those amounts invoiced by the Subcontractor which have been approved by the Contractor and the Owner in accordance with the terms and conditions of the Prime Contract, less applicable Lien holdbacks, seven (7) working days after the Contractor receives payment thereof from the Owner or thirty (30) days following the date of the Subcontracor’s submission of its invoice for progress payment, whichever is later. Amounts due to the Subcontractor under Article 3 shall not become payable by the Contractor to the Subcontractor unless and until the Contractor receives payment from the Owner on account of these amounts.

[9] The Ontario Court of Appeal considered a similar type of provision in the case of Timbro Developments Ltd. v Grimsby Diesel Motors Inc. (1988) 32 C.L.R. 32. It found that under such a clause, the subcontractor clearly assumes the risk of non-payment by the owner to the contractor.

[10] In an effort to overcome the effect of this provision, the Plaintiff in this case has referred me to the decision of Justice Poulin in the matter of Applied Insulation Co. v Megatech Contracting Ltd. (1994) 22 C.L.R. (2d) 251 which considered a similar type of clause. In that case, Justice Poulin found that when a contractor wishes to rely upon a “pay when paid” provision an issue arises as to whether there has been any act or default on the part of the contractor which has been the cause of the owner’s failure to pay. If there has been, then the contractor would not be entitled to rely on the “pay when paid” provision of the contract.

[11] The Plaintiff has neither provided nor alleged any specific evidence of default on the part of the Defendant in its contract with the owner. It has, however, provided the court with a copy of a Statement of Claim issued by the Owner against the Defendant. That claim alleges a great many contractual breaches and negligent actions by the Defendant. The Plaintiff asks that I infer from that Statement of Claim that the Defendant is itself responsible for the delay in payment by the owner and therefore cannot claim the benefit of the “pay when paid” provision.

In Arnoldin Construction & Forms Ltd. v. Alta Surety Company, 1995 NSCA 16 (CanLII), the Nova Scotia Court of Appeal chose to follow a line of American cases in addressing the specific issue of whether receipt of payment by the general contractor from the owner was a condition precedent to the general contractor’s obligation to pay a subcontractor, or whether the provision was really a timing provision to facilitate a prompt payment to the subcontractor upon the general contractor’s receipt of payment. That line of cases held that:

(1) absent a clear expression to the contrary, a contractual provision that payment is not due to the subcontractor until the owner has been paid by the general contractor does not establish a condition precedent for payment, but merely fixes time for payment to the subcontractor; and

(2) in order for a general contractor to impose a term on its subcontractor that payment for the subcontractor’s work is conditional on the contractor itself being paid by the owner, the contractor must use clear language indicating its intention in that regard to alert the subcontractor that the payment to it is conditional on the owner paying the general contractor:

In Schuler‑Haas Elec. v. Aetna Cas. & Sur., 371 N.Y.S. (2d) 207 the Supreme Court of New York, Appellate Division, Fourth Department had occasion to consider the very issues that arise on this appeal. In its decision of July 18th, 1975 the five judge court had to interpret a payment bond containing virtually the identical language as contained in the Alta Bond we have under consideration and a subcontract provision that payment would be made to the subcontractor when payment was received by the other party to the subcontract.

The subcontract provisions which was really a contract between a subcontractor and his sub, the plaintiff, was described by the court as follows:

" In its contracts with subcontractors Logic Builders, Inc. and I.C.H. Contractors, Inc. plaintiff agreed that its rights are subject to the terms of the contract between the owner and the general contractor, and that its contractors must pay plaintiff, "when full payment for this subcontract work is received [by the general contractor] from the Owner". By the terms of the general contract the general contractor agreed to pay unpaid obligations on the project within 15 days after it receives its final payment from the owner."

At p. 210 of the decision the court made the following statement:

“ There is no doubt that if the parties clearly expressed an intention that no subcontractor (as the plaintiff) should have a right to be paid or to sue on the payment bond until all questions relating to the contracts have been resolved and the owner has made his final payment due under the contract to the general contractor, such agreement would be binding, and it would constitute a condition precedent to plaintiff's action against the surety."

The court went on to state at p. 211:

" Courts in other jurisdictions which have construed similar provisions in payment bonds have held that the clauses in the several contracts for the project which provide that the contractor shall pay his subcontractors within a stated number of days after the contractor has received payment from the owner, merely fix the time when payment is due and do not establish a condition precedent to payment (Howard‑Green Elec. Co. v. Chaney & James Const. Co., 12 N.C. App. 63, 182 S.E. 2d 601 [1971]; A.J. Wolfe Co. v. Baltimore Contractors, Inc., 355 Mass. 361, 244 N.E. 2d 717 [1969]; Fishman Const. Co. v. Hansen, 238 Md. 418, 209 A.2d 605 [1965];

Thos. J. Dyer Co. v. Bishop Intern. Engineering Co., 303 F. 2d 655, supra; Moore v. Continental Cat Co., 366 F. Supp. 954 [W.D. Ok 1., 1973])."

The court went on to quote from several of the decisions as follows:

“In Wolfe, supra, 355 Mass. at pages 365‑366, 244 N.E.2d at page 721, the court said,

"We interpret art. II(a) merely as setting the time of payment and not as creating a condition precedent to payment. In the absence of a clear provision that payment to the subcontractor is to be directly contingent upon the receipt by the general contractor of payment from the owner, such a provision should be viewed only as postponing payment by the general contractor for a reasonable time after requisition (and completion of the subcontractor's work mentioned in the requisition) so as to afford the general contractor an opportunity to obtain funds from the owner."

In Dyer, the court, at page 659, stated that,

"the crucial issue in this case [is] * * * whether * * * paragraph 3 of the subcontract is to be construed as a conditional promise to pay, enforceable only when and if the condition precedent has taken place, which in the present case has not occurred, or, * * * it is to be construed as an unconditional promise to pay with the time of payment being postponed until the happening of a certain event, or for a reasonable period of time * **";

and at page 661 the court stated,

"[i]t seems clear to us under the facts of this case that it was the intention of the parties that the subcontractor would be paid by the general contractor for the labor and materials put into the project * * *. In our opinion, paragraph 3 of the subcontract is a reasonable provision designed to postpone payment for a reasonable period of time after the work was completed, during which the general contractor would be afforded the opportunity of procuring from the owner the funds necessary to pay the subcontractor. (Citation omitted.) To construe it as requiring the subcontractor to wait to be paid for an indefinite period of time until the general contractor has been paid by the owner, which may never occur, is to give to it an unreasonable construction which the parties did not intend at the time the subcontract was entered into"."

The court concluded that "under a reasonable construction" the plaintiff was entitled to judgment against the bonding company. The decision was affirmed by the Court of Appeals of New York, 389 N.Y.S. (2d) 348.

The decision has been frequently applied in cases involving the construction of so‑called "pay when paid" clauses. See Otis Elevator Company v. George A. Fuller Company, 569 New York Supplement, 2d Series, a decision of the Supreme Court of New York, Appellate Division Second Department dated April 22nd, 1991. In that case the subcontract provided that the contractor shall pay the subcontractor upon receipt by contractor of said sum from owner. The court in finding for the subcontractor stated at p. 120:

“ even if the defendant's position that its payment provision was controlling is correct, it is clear that payment by the owner to the defendant was not made a precondition to payment by the defendant to the plaintiff. "Absent a clear expression to the contrary, a contract provision that payment is not due the subcontractor until the owner has paid the general contractor does not establish a condition precedent for payment but merely fixes a time for payment " (Action Interiors v. Component Assembly Sys., 144 A.D.2d 606, 607, 535 N.Y.S. 2d 55; see, Grossman Steel & Aluminum Corp. v. Samson Window Corp., 78 A.D. 2d 871, 433 N.Y.S. 2d 31, affd. 54 N.Y. 2d 653, 442 N.Y.S. 2d 769, 426 N.E. 2d 176; Sturdy Concrete Corp v. NAB Constr. Corp., 65 A.D. 2d 262, 411 N.Y.S. 2d 637; Schuler‑Haas Elec. Ca v. Aetna Car. & Sur. Co. 49 A.D. 2d 60, 371 N.Y.S. 2d 207, affd., 40 N.Y. 2d 883, 389 N.Y.S. 2d 348, 357 N.E. 2d 1003). Therefore, the defendant's contention that under its "pay‑when‑paid" clause, the plaintiff carried the risk that the owner would delay in or fail to make payment is without merit."

As pointed out by the learned trial judge there are authoritative decisions that reached a different result.

I am in substantial agreement with the views expressed in the Schuler‑Haas line of cases. In my opinion, in order for a general contractor to impose a term on a subcontractor pursuant to a standard form of contract, that payment for its work is conditional on the contractor being paid by the owner the contract would require much clearer language than that contained in the subcontract between Gem and the appellant. An intention so important cannot be buried in obscure language that would not alert the subcontractor that payment for the subcontract work was conditional on the owner paying the contractor.

The primary obligation of the Gem was to pay the appellant $805,000, subject to additions and deductions, for the performance of the work covered by the subcontract. The work was completed. Clause 2 merely provides a procedure for obtaining payment. The subcontractor is to submit monthly requisitions for payment showing the percentage of the work done to that point in time. After deduction for a 10% mechanics' lien holdback and previous payments the balance of the amount of the requisition as approved by the contractor "shall be due to the subcontractor on or about one day after receipt by the contractor of payment from the owners".

The final payment under the subcontract is to be made on acceptance of the work "and within thirty (30) days after payment has been received by the contractor."

The shorter Oxford Dictionary defines the word "due" as meaning "owing, payable as a debt or obligation".

The same Dictionary defines the word "after" as meaning "later, following".

There is a difference between the progress payment provision and the final payment provision in Clause 2. Under the former it is provided that the balance of the requisition "shall be due" on or about one day after the contractor is paid by the owner. Whereas under the latter it is provided that the final payment "shall be made" on acceptance of the work "and within thirty (30) days after payment is received from the owner." The final payment clause shows an intention that upon acceptance of the subcontractor's work payment was required to be made within thirty (30) days after payment has been received by the contractor. As the final progress billing shows the appellant's work was 100% complete we are dealing with the interpretation of the final payment provision of the Contract. As the word "after" is defined to mean "later" or "following" a reasonable interpretation of the payment provision is that it is but a timing device as to when the balance calculated as owing under the subcontract was to be paid. This must be so as the focus of the final payment provision is that payment shall be made within thirty (30) days after payment is received from the owner. This was a standard form of contract used by Gem. Had Gem intended that nothing would be owing or payable to a subcontractor upon completion of the work unless payment was received from the owner, the contract ought to have contained clear words to denote such an intention. Appropriate words would have been that the balance claimed by the subcontractor for the completion of the work pursuant to the terms of the subcontract would only be paid "if” the owner paid the contractor. The word "if” is defined in the Oxford Dictionary as meaning "on the condition or supposition that". To impose on a subcontractor a term that payment was conditional on the contractor receiving payment from the owner would require the clear language of the nature I have identified. Any provision intended to diminish or remove the subcontractor's right to be paid should clearly state that and set out the circumstances in which the subcontractor will not be paid following the completion of his work. Such a provision should not only be clear but specific, that is to say, it will not be inferred as the intended effect of a clause which addresses some other less fundamental term or provision of the contract such as the timing of payments to the subcontractor in relation to the time when the owner pays the contractor.

The foregoing reasoning is supported by consideration and application of the contra proferentem doctrine as an aid to the interpretation of this contract, the intent of which, with respect to the payment for the work, is not clear from the words used in the contract.

In A&B Mechanical Ltd. v. Canotech Consultants Ltd. et al, 2013 MBQB 287 (CanLII), Joyal, C.J.Q.B. found the reasoning in Arnoldin Construction & Forms Ltd. v. Alta Surety Company attractive:

[33] In Arnoldin Construction & Forms Ltd. v. Alta Surety Co. (1995), 1995 NSCA 16 (CanLII), 137 N.S.R. (2d) 281 (C.A.), the Nova Scotia Court of Appeal addressed a pay-when-paid clause in a contract as between the general contractor and its subcontractor. The clause included that any amount claimed by the subcontractor during construction “shall be due to the subcontractor on or about one day after receipt by the contractor of payment from the owners”. The subcontract further provided that the final payments to the subcontractor would be made on acceptance of the subcontractor’s work “and within 30 days after payment has been received by” the contractor. The contractor argued that it did not owe anything to the subcontractor as it had not yet been paid by the owner. It was the subcontractor’s argument that payment provisions of the subcontract were not a condition precedent to it being paid by the contractor, but rather, they were a timing mechanism as to when the subcontractor was to be paid by the general contractor.

[34] In Arnoldin, the Nova Scotia Court of Appeal chose to follow a line of American cases in addressing the specific issue of whether receipt of payment by the general contractor from the owner was a condition precedent to the general contractor’s obligation to pay a subcontractor, or whether the provision was really a timing provision to facilitate a prompt payment to the subcontractor upon the general contractor’s receipt of payment. That line of cases held that:

(1) absent a clear expression to the contrary, a contractual provision that payment is not due to the subcontractor until the owner has been paid by the general contractor does not establish a condition precedent for payment, but merely fixes time for payment to the subcontractor; and

(2) in order for a general contractor to impose a term on its subcontractor that payment for the subcontractor’s work is conditional on the contractor itself being paid by the owner, the contractor must use clear language indicating its intention in that regard to alert the subcontractor that the payment to it is conditional on the owner paying the general contractor. See Arnoldin, supra, at paras. 19-28.

[35] At para. 17 of Arnoldin, the court noted importantly that:

17 Written contracts are to be interpreted according to the plain, ordinary meaning of the words used by the parties. Particular clauses are to be interpreted in the context of the whole of the Contract. This is the basic rule of interpretation.

[36] I accept A&B’s submission that although the Manitoba Court of Appeal has not dealt with the specific issue of the validity of pay-when-paid clauses, it has stated that it is attracted to the reasoning of the Nova Scotia Court of Appeal in Arnoldin, requiring a general contractor to use very clear and specific words before it can be said that a pay-when-paid provision can govern the subcontractor’s entitlement to payment. See Winfield Construction Ltd. v. Robinson (B.A.) Co. et al. (1996), 1996 CanLII 12451 (MB CA), 110 Man.R. (2d) 41 (C.A.). In Winfield, the issue related to how much money would have to be paid into court by the general contractor to vacate liens registered against the owner’s land by subcontractors. The general contractor relied on a pay-when-paid clause to argue that since it had not been paid by the owner, nothing was owing to the subcontractor and, therefore, the only amount that should be paid into court to vacate the liens was the holdback. The court was of the view that the general contractor could not rely on the pay-when-paid clause in this way and that the amount “payable” under The Builders’ Liens Act, R.S.M. 1987, c. B91 (the “Act”) is not to be interpreted by referencing contractual provisions as between the general contractor and the owner, but must be interpreted to refer to the actual state (value) of the work performed by the subcontractor making the claim for lien. See Winfield at para. 47.

[...]

[41] In arguing its position on this motion, A&B has persuasively relied upon two additional cases – Tam-Kal Ltd. v. Stock Mechanical (1998), 80 O.T.C. 161 (Ont. C.J.) and Builders’ Supplies Ltd. II v. 1489683 Ontario Ltd. (2005), 43 C.L.R. (3d) 74 (Ont. S.C.J.).

[42] The Ontario Court of Justice in Tam-Kal Ltd. addressed an action brought by the plaintiff as subcontractor for, amongst other things, judgment against the defendant as subcontractor in respect of the amount owed to the plaintiff under a subcontract between the two parties. As there was no written agreement, the defendant in that case relied upon a pay-when-paid provision in the purchase order submitted by it to the plaintiff. The defendant argued that the plaintiff was only entitled to be paid to the extent that the defendant was paid by the general contractor. At para. 17 of the judgment, Ground J. addressed the pay-when-paid argument as follows:

17 ... Although it would appear from the evidence that, in the normal course, payment is made by a mechanical contractor to its sub-contractors when payment is received by the mechanical contractor from the general contractor, I am unable to conclude that this constitutes evidence that the sub-contractors waive their right to be paid if the mechanical contractor does not receive payment from the general contractor. The logical result of the application of such a principle would be that, if the general contractor became insolvent and was unable to pay the mechanical contractors, the sub-contractors would be unable to collect a debt legally owing to them even if the mechanical contractor was in a position to pay such debt. ...

[43] In Tam-Kal Ltd., the court held that the supposed pay-when-paid provision was ambiguous and that that clause, when contained within a document prepared by the defendant, was subject to the principle of contra proferentem. The result was that the provision was interpreted against the defendant as the author of the contract which contained the provision in issue. The court held that the provision was in fact not a true pay-when-paid clause, but was a timing and process provision.

[44] A&B also relies upon Builders’ Supplies wherein the plaintiff, a subcontractor, moved for summary judgment against the defendant in its action claiming for monies owing to it on a building project. The defendant argued that there was a pay-when-paid agreement between the parties and relied upon evidence which included that the parties had a long history of prior contractual arrangements and that previous payments were not made by it on the project until it was paid by the contractor. In deciding the case in Builders’ Supplies, the court acknowledged that finding a pay-when-paid arrangement would have conceptual and practical implications for the contractual relationship between the plaintiff and the defendant:

12 A "pay when paid" contractual arrangement means that the Plaintiff and the Defendant Cromax are really "co-adventurers/partners" in this project. … The arrangements would, in effect, constitute a waiver of the right of the Plaintiff to be paid in the event that the Defendant Cromax was not paid by the general contractor or anyone else. …

[45] In deciding to grant summary judgment to the plaintiff in Builders’ Supplies, the judge specifically noted that the invoices sent out by the plaintiff set out a timeline to be paid and included an interest penalty provision. As well, it was noted the defendant had acknowledged the outstanding amount. The judge had also noted that even if the defendant’s version of the facts was accepted, it was not sufficient to establish a pay-when-paid provision in the sense that the plaintiff was prepared to waive the right to be paid in the event the defendant was not paid (see Builders’ Supplies, paras. 20, 21, 26-27).

[46] Had I needed to rely upon extrinsic evidence to interpret the clause in question, the evidence before the court in the present case makes it difficult to conclude that A&B would have intended to waive its right to be paid by Canotech if Canotech did not receive payment from 5994731. Similar to the facts in Builders’ Supplies, each of A&B’s invoices to Canotech indicated that it was immediately due and owing and imposed an interest provision of 2% per month (24% per year) on overdue accounts.

[47] Similar to the situation in Builders’ Supplies, even with A&B and Canotech’s long-standing dealings, there is nothing in the words in the clause in question nor anywhere else in the Subcontract (or prime contract) which would suggest that A&B and Canotech were co-adventurers or partners in the project such that there can be said to have been a pay-when-paid arrangement between them, now or previously. This, in addition to the fact that it cannot be said that the words in the clause in question constitute a clear enough warning to a subcontractor like A&B so as to alert it to the sort of potential risk inevitably assumed

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