What Is a Pay-When-Paid Clause for Freelancers?

A pay-when-paid clause links your payment to money your client expects to receive from somebody else.

For example:

The Contractor will be paid within 14 days of the Client receiving payment from the end customer.

That is very different from ordinary Net 30 or Net 60 terms.

The useful question is:

Why should payment for my work depend on a third party I do not control?

How pay-when-paid works

Imagine you subcontract for an agency.

You complete the work and invoice the agency, but the agency's customer pays late.

Under a pay-when-paid clause, your payment may also be delayed.

The chain becomes:

1. you perform the work;
2. the agency invoices its customer;
3. the customer pays the agency;
4. only then does the agency pay you.

The main risk: no fixed payment date

With standard Net 30 terms, you can usually identify a due date.

With pay-when-paid wording, the due date may depend on an event that has no certain date.

If the end customer disputes the agency's invoice or becomes insolvent, what happens to you?

The contract should ideally answer that question.

Watch for “if paid” wording

There is an important commercial difference between wording that delays payment and wording suggesting payment may never become due unless the client is paid.

For example:

Payment will be made when the Client receives payment.

versus:

Payment is conditional upon the Client receiving payment.

The legal effect can depend on the jurisdiction and drafting, but the second wording raises an obvious practical concern.

Ask who bears the customer-credit risk

You have no direct relationship with the end customer in many subcontracting arrangements.

Ask:

• Can you verify whether the customer has paid?
• Is there a maximum waiting period?
• What happens if the customer disputes something unrelated to your work?
• What happens if the agency causes the delay?
• What happens if the customer never pays?

Compare with normal payment terms

A clearer structure might provide a fixed outside date.

For example:

Payment is due 14 days after the Client receives payment from its customer, but no later than 45 days after receipt of the Contractor's invoice.

That still gives the client some cash-flow flexibility while giving the freelancer a maximum waiting period.

Whether that arrangement is appropriate is a commercial decision.

Questions to ask before signing

Check:

• Is payment merely delayed or genuinely conditional?
• Is there a maximum payment deadline?
• Can you see whether the end customer has paid?
• Are you affected by disputes unrelated to your work?
• What happens if the customer never pays?

For broader context, see Freelance Payment Terms: What Should You Look Out For?.

PactRivet can flag payment wording that makes your money depend on third-party events and turn it into practical questions before you sign.

Related guide

For a broader look at this area, see Freelance Payment Terms: What Should You Look Out For?.

PactRivet provides general information and questions to consider. It is not legal advice.