Construction Contractors’ Legal Rights to “Stop Work” for Non-Payment Under California Law

One of the riskiest things that a Construction Contractor can do - other than submitting a bid and signing a fixed price contract in the first place - is to stop work or walk off or abandon the job when payment or other disputes arise.

The Common Law in most states allows one party to a contract to stop performing if the other party breaches the contract in a material way.

Typically the property owners’ main duties under a Construction Contract are to provide buildable plans, make progress payments, and not interfere with the progress of the work.

The problem or risk for a Construction Contractor who stops work or walks off the job when the Owner breaches one of these obligations is that the Owner will often then replace you and hire a new contractor to finish the project.

That new contractor will almost always charge more than the original contractor, because they know that this is a troubled and maybe risky project, and they cannot be sure of the quality of the earlier construction work, for which they are assuming some liability.

The Owner then will - and the law allows them - to sue the original contractor for the extra cost to complete the job over and above the remaining portion of your contract, assuming that you were not legally justified in stopping work or abandoning the job.

Abandoning or failing to complete a job without a good legal excuse can also be cause for license suspension or other disciplinary action by the Contractors State License Board under Bus. & Prof. Code §§ 7107 or 7113, the Contractors State License Law.

However, an unique California Law affords a contractor legal protection to stop work on the job when payment disputes arise on private construction projects.

Under Civil Code §§ 8830 et seq., a contractor not paid within 35 days of the due date per the Contract can issue a “Stop Work Notice” to the Owner and Construction Lenders, stating that it will Stop Work on the job if not paid within 10 calendar days, provided that there is no dispute as to the quality of the contractor’s work.

Five days before giving the 10 day Stop Work Notice, the prime contractor must post on the jobsite a Notice of Intent to Give a Stop Work Notice.

The Stop Work Notice must also be given to all subcontractors having a direct contract with the prime contractor.

If properly given, such a Stop Work Notice relieves the contractor from liability for delay or other damages caused by the resulting work stoppage, likely such as delay damages, extra costs, consequential damages, or the extra cost to have another contractor finish the job.

If properly followed according to the statute, the Stop Work Notice also relieves the General Contractor from liability to a subcontractor or material supplier, other than for work already performed, except for work unique to the job that has been specially manufactured, fabricated or ordered.

If the payment dispute is not resolved within the ten days, the prime Contractor may file an “expedited” or “priority” proceeding or legal action in the local Superior Court for a quick determination of the amount owed.

If the Stop Work Notice claim is resolved, the prime contractor must post a Notice on the job and give notice to its direct subcontractors that the Stop Work Notice is cancelled.

The Contractor’s right to issue a Stop Work Notice and to the expedited Superior Court proceeding cannot legally be waived or cancelled by any provision in a contract.