Legal Question in Construction Law in California

Legal, yes; enforceable, not always.

A general contractor cannot hide behind a "pay when paid" clause to avoid paying the sub forever. That would make the "pay when paid" clause into a "pay if paid" clause, and they have been held unenforceable in the face of a collection suit by a subcontractor.

However, a "pay when paid" clause can be enforced by the subcontractor when it results in an early right to payment, A pay-when-paid clause is also enforceable by the contractor and against the sub if there is other contract language creating a final, drop-dead date for payment, or if the overall arrangement can for some other reason or under some other interpretation be found not to waive the sub's right to payment within some reasonable time frame.

In short, a contractor and its subs are free to make reasonable agreements about when payment will be due, but the agreement is not reasonable if it makes payment of the subs totally and forever contingent on the general getting paid.