Construction Projects

Waive Not, Want Not: Waivers and Releases on California Construction Projects

Garret Murai | California Construction Law Blog
February 8, 2015

California is one of a handful of states (12 to be exact) which have statutory mandated waiver and release forms for construction projects.

So here’s what you need to know before you sign one (or two, or three).

What are California’s statutory waiver and release forms?

California has four statutory waiver and release forms for construction projects.

Which form applies depends on two things: (1) whether it is for progress payments or final payment; and (2) whether it is provided before or after you have been paid.

The four waiver and release forms are:

Conditional Waiver and Release on Progress Payment
Unconditional Waiver and Release on Progress Payment
Conditional Waiver and Release on Final Payment
Unconditional Waiver and Release on Final Payment

They may sound similar, but they’re not, as shown below:

How are the waiver and release forms supposed to be used?

The waiver and release forms are intended to be used when progress payments and final payment are made on a construction project. By signing a waiver and release form you are waiving your right to record a mechanics lien, file a stop payment notice or make claim on a payment bond once you are paid.

Who signs the waiver and release forms?

Waiver and release forms are often required by project owners from their direct contractors. Conditional waiver and release forms are required before payment. And unconditional waiver and release forms are required after payment.

Waiver and release forms may also be required by direct contractors from their subcontractors and material suppliers, and from subcontractors and their material suppliers from their second-tier subcontractors and second-tier material suppliers, and so on.

It is not unusual for a project owner to require their direct contractors to provide waiver and release forms for themselves (i.e., the direct contractor) as well as from subcontractors and material suppliers of every tier working under a direct contractor.

How do the waiver and release forms work?

The waiver and release forms are intended to be used together.

As an example, suppose you are a direct contractor performing work for a project owner. On your first progress payment, the project owner may require that you provide a Conditional Waiver and Release Upon Progress Payment together with your payment application as a condition of payment. On your second progress payment, the project owner may require that you provide an Unconditional Waiver and Release Upon Progress Payment for the first progress payment and a Conditional Waiver and Release Upon Progress Payment for your second progress payment as a condition of payment, and so on. When you reach the point of final payment, the project owner may require that you provide a Conditional Waiver and Release Upon Final Payment as a condition of payment and an Unconditional Waiver and Release Upon Final Payment once payment has been made.

Here’s an illustration assuming a hypothetical project with four payments:

Can I use my own waiver and release form or change the language in the waiver and release forms?

Generally no. California’s waiver and release forms are mandatory, and while you can adjust the language in the forms, beware if you do. The Code sections which outline the language required in the waiver and release forms (Civil Code sections 8132, 8134, 8136 and 8138) state that a waiver and release “shall be null, void, and unenforceable unless it is in substantially the following form . . .” (emphasis added).

How do you complete the waiver and release forms?

The “fillable” sections of the waiver and release forms are generally the same for the Conditional Waiver and Release Upon Progress/Final Payment and Unconditional Waiver and Release Upon Progress/Final Payment.

For the Conditional Waiver and Release forms:

Name of Claimant: This would be your company.
Name of Customer: This would be the company with whom your company has a contract to perform work.
Job Location: The location of the project site.
Owner: The name of the project owner.
Through Date: This is the date through which the waiver and release applies. So, for example, if the waiver and release is for your March 1, 2015 pay application, it would be through March 1, 2015.
Maker of Check: Typically, this is the company with whom your company has a contract. However, it could be another company if it’s a joint check.
Amount of Check: Again, typically, this is the amount of your pay application for the month.
Check Payable to: Again, typically, this your company, although it could be your company and another company if it’s a joint check.
Exceptions: Item (3): This section should be filled out if you have not been paid a previous progress payment.
Claimant’s Signature: Signature from someone at your company authorized to sign the waiver and release form.
Claimant’s Title: The title of the person signing the waiver and release form.
Date of Signature: The date the waiver and release form was signed.

For the Unconditional Waiver and Release forms:

Name of Claimant: This would be your company.
Name of Customer: This would be the company with whom your company has a contract to perform work.
Job Location: The location of the project site.
Owner: The name of the project owner.
Through Date: This is the date through which the waiver and release applies. So, for example, if the waiver and release is for your March 1, 2015 pay application, it would be through March 1, 2015.
Claimant has received the following progress payment:Amount of the progress payment received.

Note: Remember a check is simply a promise to pay. As such, for those that are cautious, an unconditional waiver and release form should not be provided until payment is actually received, which in the case of a check, is when the check clears the bank upon which it is drawn.

Claimant’s Signature: Signature from someone at your company authorized to sign the waiver and release form.
Claimant’s Title: The title of the person signing the waiver and release form.
Date of Signature: The date the waiver and release form was signed.

If I’m a contractor and I complete and sign a conditional waiver and release form am I giving up all my rights?

No. First, with a conditional waiver and release form you are only giving up rights once you are paid. However, an unconditionalwaiver and release form is just that . . . unconditional . . . and once you sign it you are indicating that you have been paid in exchange for giving up your rights.

Second, with respect to both the conditional and unconditional waiver and release forms you are only giving up your statutory construction payment remedies, namely, the right to record a mechanics lien, serve a stop payment notice and make a payment bond claim. You are not giving up rights to sue: (1) for retention (in the case of waivers and releases for progress payments); (2) for extra work in which you have not been paid; (3) for unpaid progress payments you specifically identify in the conditional waivers and releases; (4) for rescission, abandonment and breach of contract claims; and (5) for disputed claims you specifically identify (in the case of waivers and releases for final payment).

If I’m a project owner and a contractor refuses to provide an unconditional waiver and release form, what happens?

First, you shouldn’t have this problem when it comes to progress payments because you are presumably going to require an unconditional waiver and release upon progress payment form for the previous payment as a condition of receiving the next payment (see illustration above).

Where this problem occurs most frequently is when it comes to the unconditional waiver and release upon final payment because, at that point, you’re not holding any money as an incentive for your contractor to provide an unconditional waiver and release upon final payment (see illustration above).

But fret not. Even if your contractor refuses to provide you with an unconditional waiver and release upon final payment, you’re covered if the contractor provided you with a conditional waiver and release upon final payment. This is because a conditional waiver and release, whether it’s for a progress payment or final payment, effectively becomes an unconditional waiver and release by its terms upon the contractor’s receipt of payment.

The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.

SOURCE: calconstructionlawblog.com

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