By Gregory R. Shaughnessy

A little used and frequently overlooked weapon in the arsenal of an unpaid contractor or subcontractor on a private work of improvement is the bonded stop notice. For the sophisticated and aggressive contractor, the bonded stop notice can be one of the most effective remedies available under California law.

I he bonded stop notice on a private project must be distinguished from a stop notice on a public project. Perhaps the most important distinction is that a general contractor has no stop notice rights on a public work of improvement. In addition, on public projects a bond is not required to accompany the stop notice.

The bonded stop notice on a private project is directed to the construction lender, who is required to Continue reading →

1. Licensee’s statement

Effective January 1, 1996 section 7030 of the business and professions coded was amended to revise the form of notice requiring at least 10 point type on all prime construction contracts as follows

“Contractors are required by law to be licensed and regulated by the contractors’ state license board which has jurisdiction to investigate complaints against contractors if a complaint regarding a patent act or omission is filed within four years of the date of the alleged violation.  A complaint regarding a latent act or omission pertaining to structural defects must be filed within 10 years of the date of the alleged violation.  Any questions concerning a contractor may be referred to the registrar, Contractors’ State License Board, P.O. Box 16000, Sacramento, California 95826.

Failure to include this written statement may constitute Continue reading →

1. Unjust enrichment

It would seem to be self-evident that a person cannot be bound to a contract unless it consents to be bound.  This is really just another way of saying that a contract requires a manifestation of mutual assent.

However, consider this situation.  A prime contractor, under contract with the owner, is creating an industrial building.  The contract price is $200,000.  The prime contractor expects to pay $50,000 for the “mechanical package” on the building including plumbing, heating, air conditioning, and the fire sprinkler system.  The contractor awards a $50,000 subcontract to S-1 for the complete mechanical package.  S-1 in turn subcontracts the heating, ventilating and air conditioning (but not the plumbing or fire sprinkler) to S-2 at a contract price of $25,000.  S-2 is a sub-subcontractor.  There is no contractual relationship between S-2 and the prime.

Now suppose that all the mechanical work has been finished and S-1 has been paid $25,000, all of which it has retained for its own work.  S-2 has been paid nothing.  At this point, S-1 leaves the state on an extended vacation.  S-2 for some reason, fails to enforce its mechanic’s lien and Continue reading →

1. Waiver of breach

Some construction contracts contain a provision that the owner waives all claims against the contractor if it makes final payment with the knowledge of a construction defect.  Such a clause was upheld in a case in which a contract for sought damages, the contractor interposed a defense a paragraph of the construction contract which provided that the making of the final payment constituted a waiver of all claims except those arising from defective work appearing after completion of the contract.  The court held that Continue reading →

If a party fails to perform under a contract, there is a breach.  A breach by one party excuses the other party from performing under the contract.  One party cannot ignore its duties under a contract and demand that the other party perform its duties.  One who breaks a promise can’t insist that the other party perform.

1. Substantial performance questions arise under construction contracts which is complicated.  How do you comply with every requirement of the plans and specifications?  What if Continue reading →