CHANGING LEGAL LANDSCAPE C
Case Delves into California’s Prompt Payment Statutes
BY GARRET MURAI NOMOS LLP
alifornia has a number of prompt payment penalty statutes on the books. Among them is Civil Code
Section 8800, requiring project owners on private works to pay progress payments to direct contractors within 30 days after demand for payment or be subject to prompt payment penalties of 2% per month on the amount wrongfully with- held and attorney’s fees spent collecting the wrongfully withheld amounts. Like California’s other prompt pay-
ment penalty statutes, however, there is an important carve-out provision: If there is a “good faith dispute” between the project owner and direct contractor, the owner may withhold up to 150% of the dispute amount and not be subject to prompt payment penalties. And that, my friends, is a higher-tiered party’s “get out of jail free” card. The Court of Appeals, in Vought
Construction Inc. v. Stock (2022) 84 Cal. App.5th 622, examined whether a project owner’s claim for liquidated damages constitutes a good faith dispute under Civil Code Section 8800.
The Vought Construction Case Vought Construction, Inc. entered a construction contract with homeowner Jay Stock for a home renovation project. Te contract required completion by a set date and included a liquidated damage provision of $300 per day for each day construction was not complete. Toward the end of the project an issue
arose regarding the installation of railings. Te home’s exterior railing was supposed to match the interior railing, and both Vought and Stock believed the railing could be ordered and installed without architectural drawings. Turns out that was not the case. Three weeks before project completion, Vought informed Stock that architectural drawings would be needed. Further, due to the onset of
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CALIFORNIA CONSTRUCTOR MAY/JUNE 2023
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