South Carolina law has long rejected “pay-if-paid” clauses. Contractors cannot avoid paying subcontractors simply because the owner has not paid them. “Pay-when-paid” clauses, however, have lived in a gray area. Courts said they could be enforced for a “reasonable” time, but no one knew how long that meant.
That changed with the Court of Appeals’ decision in J&H Grading & Paving, Inc. v. Clayton Construction Company, Inc. The court ruled that a general contractor cannot delay payment for more than 90 days. Beyond that, the delay is per se unreasonable.
The Case
J&H Grading completed its work on a car dealership project and submitted its final invoice for retainage. Clayton Construction admitted the money was owed but refused to pay until the owner released funds. Months passed. J&H filed a mechanic’s lien and issued a statutory demand under S.C. Code Ann. § 27-1-15.
Although payment eventually came through a settlement with the owner, J&H reserved its right to seek attorney’s fees and interest. The court agreed, holding that Clayton’s refusal to pay was unreasonable. The decision made clear that “reasonable time” cannot extend past 90 days from a subcontractor’s final request for payment.
Why It Matters
The court anchored the 90-day rule to the mechanic’s lien statute, reasoning that subcontractors should not be forced to file a lien just to preserve their right to payment. If payment has not been made within that timeframe, the law views the delay as unlawful.
For general contractors, this decision requires careful contract drafting and financial planning. If an owner delays payment, you may still be responsible for paying subcontractors within 90 days or risk liability for interest and attorney’s fees.
For subcontractors, the decision provides clarity and leverage. A statutory demand under § 27-1-15 is no longer a hollow gesture. It is a powerful tool that can trigger fee-shifting if payment is withheld without cause.
The Bottom Line
J&H Grading closes the gap on uncertainty. South Carolina now has a clear rule: subcontractors must be paid within 90 days, regardless of when or whether the owner pays the contractor. Contractors who hold back funds past that deadline do so at their peril.
