CONTRACTOR PAYMENT DISPUTES

For contractors, subcontractors, suppliers, and property owners in the construction industry, ensuring timely and accurate compensation is vital. Issues including nonpayment for services, misinterpretations of contract, undocumented change orders, project delays, and mechanics' liens, directly impact financial stability. With legal guidance and support from GLO, you can strategically address construction payment disputes, clarify contractual obligations, and protect your financial interests to ensure fair resolutions and maintain professional relationships.

Understanding Ambiguous Terms and Undocumented Changes

Vague or incomplete language in a contract can frequently lead to disputes. For example, a phrase like “upon substantial completion” can create conflicting interpretations, leaving one party expecting payment while the other withholds it.

Changes in scope due to site conditions or client requests often require change orders. When those changes aren’t clearly documented and formally approved, they become breeding grounds for conflict. A contractor may complete additional work based on a verbal instruction, only to face nonpayment due to lack of written approval. Meanwhile, an owner might be surprised by charges for work they assumed was included. Without precise contracts and rigorous documentation, both parties risk costly disputes, delayed payments, and litigation. Legal counsel helps ensure contracts are clear and that all changes are properly recorded allowing for a smooth construction project.

"Pay-When-Paid" vs. "Pay-If-Paid"

In Colorado construction contracts, the difference between “pay-when-paid” and “pay-if-paid” clauses is critical. A “pay-when-paid” clause generally delays a subcontractor’s payment until the general contractor receives payment from the owner- but courts often interpret this as a delay, not a condition. This means subcontractors are still entitled to payment within a “reasonable time,” even if the owner hasn’t paid.

By contrast, a “pay-if-paid” clause makes payment to the subcontractor contingent on the general contractor being paid first. This shifts the risk of owner nonpayment entirely onto the subcontractor, potentially leaving them unpaid despite completing their work. Colorado courts will enforce such clauses only if the language clearly states that (1) payment is conditioned on the owner’s payment, and (2) the subcontractor assumes the risk of nonpayment. If these conditions aren’t met, courts may interpret the clause as “pay-when-paid.” Consulting a knowledgeable lawyer can help identify the risks, negotiate fairer terms, and challenge unenforceable provisions to protect a subcontractor’s right to be paid.

Understanding Mechanics' Lien

Colorado’s mechanics’ lien statutes offer contractors, subcontractors, and suppliers a powerful remedy if payment is not received. A lien must generally be filed within four months of the last day labor or materials were provided, and a Notice of Intent to Lien must be served at least ten days before recording.

Even small errors in lien content, property description, or service can void the lien. Property owners who ignore valid liens risk foreclosure. Conversely, owners may face inflated or fraudulent liens, forcing them to clear title or defend against unjust claims. Having a lawyer by your side can ensure proper filing or contesting of a lien to successfully protect your rights.

Implied Contracts and Material Price Shocks

Not all construction relationships are formalized in writing. Still, under Colorado law, verbal agreements, written messages, or consistent conduct can give rise to an implied contract. Courts may award payment under theories like quantum merit or promissory estoppel where services were provided and accepted with the reasonable expectation of compensation. Legal guidance and evidence can help prove these claims.

Recent material price spikes have blindsided many contractors. Contracts entered before the volatility often lack provisions to address surging costs. Contractors locked into lump sum or GMP contracts may face major losses. Relief may depend on force majeure or hardship clauses, if present, or complex legal doctrines like frustration of purpose or impossibility. Navigating these situations requires sophisticated legal analysis.

How GLO Can Help

At GLO, we bring deep knowledge of Colorado construction law and practical, results-oriented legal support to every project. Whether you're a contractor seeking payment, a property owner defending against unjust claims, or a subcontractor navigating complex payment chains, we’re committed to protecting your bottom line, enforcing your rights, and resolving disputes efficiently. We begin with a thorough contract review, clarifying payment terms, deadlines, and dispute resolution provisions, so you fully understand your obligations and options. We also guide you through informal negotiations and draft formal demand letters to encourage early, favorable outcomes.

In addition to resolving disputes, we offer proactive strategies to help you avoid them: drafting clear contracts, documenting changes, maintaining communication, and monitoring payment timelines. We advise on prompt payment laws and lien waivers to ensure you’re fully protected. If you’re building in Colorado, GLO has your back—securing your payments, enforcing your rights, and helping you avoid costly disruptions.

Contact GLO today to secure strategic legal support for your next construction project or payment dispute—before delays, liens, or miscommunications cost you more than money.