Note
Pay-When-Paid in Thai Subcontracts
Pay-when-paid is the clause in many Thai subcontracts that conditions the main contractor’s obligation to pay on the owner having first paid the main contractor. Most subcontractors read the 30-day or 45-day credit term and move on. The sentence conditioning when that clock starts is easier to miss and harder to recover from once a project is live.
The clause is enforceable under Thai contract law. Understanding what it says and what it does not say is the difference between a billing timeline you can plan against and one that exists only on paper.
What does a pay-when-paid clause actually say?
The wording varies, but the core structure is the same: the main contractor will pay the subcontractor within a set number of days of receiving payment from the owner for the relevant portion of work.
Two things follow from this. First, the payment clock does not start when you issue your invoice. It starts when the main contractor receives its own payment from the owner. If the owner pays late, delays a payment run, or disputes a claim unrelated to your work, your payment is held without the main contractor breaching any obligation to you.
Second, most Thai pay-when-paid clauses carry no explicit outside date. There is no backstop, no day by which payment must be made regardless of the owner’s status. A clause without a backstop can theoretically suspend payment for as long as the owner’s payment is outstanding, which is fundamentally different from a credit term whose clock starts on invoice date and ends on a fixed day.
Why does this affect your billing timeline more than the payment terms line?
Your payment terms tell you how long the credit period is once the clock starts. The pay-when-paid clause tells you when the clock starts.
A subcontractor who issues a stage invoice on the 5th with 45-day terms expects payment by the 20th of the following month. Under a pay-when-paid clause, that expectation holds only if the main contractor was already paid by the owner in time to start that clock. If the main contractor’s own billing for that stage was disputed or delayed, the 5th and the 45 days may be irrelevant to when money moves.
What four things should a pay-when-paid clause contain?
When you read the payment clause in a subcontract, look for four things.
Whether the obligation is conditional or unconditional. “The main contractor will pay within 45 days of invoice” is unconditional. “The main contractor will pay within 45 days of receiving payment from the owner” is conditional. One gives you a fixed date; the other gives you a floating one. The difference is not always clear on a first read.
Whether there is a backstop date. Some clauses add a cap alongside the conditional language: within 45 days of receiving payment from the owner, or within 90 calendar days of the subcontractor’s invoice, whichever is earlier. That cap converts a floating obligation into a bounded one. If the clause you are reading has no backstop, ask for one before signing.
Which work the payment covers. A clause that ties your payment to the owner’s payment for “the relevant portion of work” is narrower than one that ties it to “any payment received from the owner on this project.” A clause without that limitation means an owner dispute unrelated to your trade can hold your payment as well.
What triggers your right to request a timeline. A few clauses include a provision: if the main contractor has not been paid by the owner within a specified period, the subcontractor may request a written explanation or a payment schedule. That provision creates a paper trail starting point. Without it, there is no mechanism to establish when the owner actually paid versus when the main contractor chose to process the subcontract payment.
A worked example: same clause, different backstop
Two electrical subcontractors sign with the same main contractor on the same project. Subcontractor A’s contract has a standard pay-when-paid clause, no backstop. Subcontractor B has the same clause but with one additional line: “In any case, payment shall be made no later than 90 calendar days from the subcontractor’s invoice date, regardless of the owner’s payment status.”
Both issue their stage invoices on the same day. The owner disputes the main contractor’s stage claim and the upstream payment is delayed by 50 days.
Subcontractor A has no date to point to. The main contractor is not in breach.
Subcontractor B has day 90 to point to. On day 91, there is a documented starting point for a formal written demand.
The backstop converted a conditional clause into a bounded one. Neither contractor’s work was in dispute. The clause wording was the only difference between the two outcomes.
What can you do once the clause is already in the signed contract?
You cannot change the clause after signing. But two things remain in your control.
The first is your own paperwork. A pay-when-paid clause does not reduce the importance of issuing your invoice on time. It increases it. The main contractor’s billing to the owner is typically triggered by completed subcontract stages. A delay on your side delays the main contractor’s billing, which delays the owner’s payment, which delays yours.
The second is your acceptance records. A signed acceptance form with a date and an issued invoice with a date is the baseline evidence if any question arises about when your work was completed and billed. Without those records, there is no starting point for a written escalation regardless of what the contract says.
FAQ
Does issuing the invoice early help when pay-when-paid applies?
Issuing the invoice as soon as the stage is accepted keeps your portion of the chain current. The main contractor cannot use your delay as a reason the upstream payment has not been triggered. It also gives you a clean record of when your obligation was met, which matters most if the delay requires a written escalation.
Can you negotiate pay-when-paid out of a Thai subcontract?
You can try, and a backstop date is more achievable than full removal. Most main contractors will not remove the clause, because their upstream exposure is real. A backstop of 90 to 120 days is often negotiable without resistance, because it only matters in an abnormal scenario, not ordinary payment runs. The conversation is most productive before signing, not after.
What if the main contractor never tells you when the owner pays them?
Without visibility into when the owner pays, you cannot know when your clock starts. A clause that entitles you to written confirmation of owner payment on request, or a backstop date, closes this gap. Without one, you depend on what the main contractor volunteers. A written request to their accounts team asking for an owner payment update creates a dated record even if the response is slow.
If you want to read through a payment clause in a contract you are about to sign, a 45-minute call is the practical starting point. We open the clause together and count what you are agreeing to before any work begins.