A prime contractor recently came to me with a problem involving a stop payment notice. It seemed that a supplier to a subcontractor on a project had a dispute with the subcontractor. As a result, the supplier filed a stop payment notice on the project. The problem was that the cumulative unpaid billings from the supplier amounted to no more than $65,000, while the stop notice filed was for approximately $75,000. In my subsequent conversation with the supplier, he acknowledged that there was only $65,000 in unpaid principal. He said he filed a stop notice in the higher amount because he wanted to be sure to cover anticipated interest, fees, costs and lost profits. I advised him that filing the stop notice in such an amount and for such a purpose was improper and requested he release the stop notice. He refused. I confirmed the conversation in writing and promptly took him to court.
[LINK TO PDF OF DAILY JOURNAL ARTICLE] [EXCERPT] Allow me to first illustrate the issue with a familiar nightmare story, then let me describe the solution. The story is that of a longstanding family construction business. For decades, the business has been profitable. The owners have built considerable wealth and look forward to a happy and abundant retirement.
Have you ever wondered whether those attorney fee clauses your attorney insists you include in your contracts really work? Or are they just words to be discarded when it comes time for a judge to make a decision in your lawsuit? Here is a true short story to show that those clauses really do work. The names have been changed to protect the innocent and avoid continuing to embarrass the guilty.