1. Subcontract Payment in New York – Understanding the Developer’s Position in a Complex Finance Structure
The developer’s primary concern was whether a New York court would enforce the contractual payment waterfall as a true condition precedent to Subcontract Payment.
In large residential projects, lenders often control disbursements through a project-level fund administrator, meaning the developer cannot release subordinate payments until senior obligations are fully funded.
Contractual Condition Precedent to Payment
The contract expressly stated that Subcontract Payment to the service provider would occur only after all senior project costs were reconciled.
Under New York law, when a contract clearly defines a payment step as a condition precedent, courts generally enforce it strictly.
This principle mirrors long-standing precedent holding that a subcontractor’s right to payment does not arise unless and until the parties’ agreed sequence of disbursements is satisfied.
The fund administrator, acting similarly to a construction escrow agent, had not yet completed reconciliation, meaning the condition precedent had not been met.
Financial Records and Fund Flow Analysis
Our team examined draw requests, lender disbursement schedules, and reconciliation reports to confirm that senior obligations were still outstanding.
We prepared a structured fund-flow chart demonstrating that:
• lender-controlled disbursements were ongoing
• senior costs had not yet been exhausted
• no surplus funds existed for subordinate Subcontract Payment
This evidence established that the subcontractor’s claim was premature as a matter of New York law.
2. Subcontract Payment in New York – Legal Strategy and Defense Framework
Once the finance structure was clarified, our firm built a comprehensive defense emphasizing enforceability of the condition precedent and the plaintiff’s burden of proof.
Enforceability of Pay-If-Paid Clauses Under New York Law
Although New York disfavors clauses that permanently bar subcontractor recovery, it does permit payment timing clauses that create valid conditions precedent when drafted unambiguously.
Here, the clause did not remove the subcontractor’s rights but defined when those rights arise.
We highlighted multiple cases upholding such clauses linked to lender disbursements and project-finance mechanics.
Burden of Proof on the Claimant
Under New York law, the subcontractor must prove that all conditions precedent have occurred.
We argued the plaintiff:
• failed to show reconciliation of senior costs
• used incomplete accounting records
• could not demonstrate surplus funds
This shifted the litigation posture decisively to the developer.
3. Subcontract Payment in New York – Contract Validity and Document Review
We also reviewed execution and internal approvals for additional defenses.
Verification of Corporate Authority and Internal Approvals
The subcontractor’s documentation contained authorization defects, enabling us to question the enforceability of the asserted obligations.
Comprehensive Review of Project Agreements
We synchronized the development, construction management, and service contracts to show clear intent for a hierarchical fund flow structure, further supporting that Subcontract Payment was subordinate to senior costs.
4. Subcontract Payment in New York – Final Outcome and Legal Significance
The court accepted our argument and held that the subcontractor failed to satisfy the condition precedent.
Because reconciliation was still in progress, the $700,000 Subcontract Payment demand was dismissed.
New York Contract Law and Timing of Payment Obligations
New York law requires strict enforcement of conditions precedent when expressly stated.
This ruling reaffirmed that Subcontract Payment obligations tied to structured fund-flow mechanisms do not arise until senior obligations are completed.
SJKP’s Construction Litigation Support
This case shows the importance of understanding how New York contract law interacts with project finance mechanics and Subcontract Payment timing.
SJKP supports clients with:
• contract drafting
• construction litigation
• fund-flow analysis
• disputes involving conditions precedent
If your organization faces Subcontract Payment issues in New York, SJKP is ready to assist.
26 Nov, 2025
