Stop-Notice

CALIFORNIA STOP PAYMENT NOTICE

(Formerly “Stop-Notice” – Cal. Civ. Code §§ 8500-8560 & §§ 9350-9364, as applicable)

TABLE OF CONTENTS

1. Document Header
2. Definitions
3. Operative Provisions
4. Representations & Warranties
5. Covenants & Restrictions
6. Default & Remedies
7. Risk Allocation
8. General Provisions
9. Execution Block
10. Verification (Penalty of Perjury)
11. Proof of Service Affidavit
12. Optional Statutory Bond (if required)

1. DOCUMENT HEADER

CALIFORNIA STOP PAYMENT NOTICE
Project: [PROJECT NAME / STREET ADDRESS / APN]
Public Entity / Owner: [OWNER OR PUBLIC ENTITY NAME]
Direct Contractor: [DIRECT CONTRACTOR NAME]
Construction Lender (if any): [LENDER NAME]
Claimant: [CLAIMANT LEGAL NAME]
CSLB License No.: [LICENSE NO.] (if applicable)
Effective Date: [DATE OF NOTICE]
Governing Law & Forum: State of California; [COUNTY] Superior Court

Recitals

A. Claimant furnished labor, services, equipment, and/or materials (“Work”) for the improvement of the Project pursuant to a contract, agreement, or purchase order with [CONTRACTING PARTY].

B. Claimant has complied with all prerequisite statutory notices, including timely service of any Preliminary Notice required by Cal. Civ. Code § 8200.

C. As of the Effective Date, Claimant is owed the unpaid principal sum of $[AMOUNT CLAIMED] for Work furnished through [LAST DATE OF WORK].

D. Pursuant to Cal. Civ. Code §§ 8500-8560 (private works) or §§ 9350-9364 (public works), Claimant is entitled to serve this Stop Payment Notice to compel withholding of funds otherwise payable to the Direct Contractor until Claimant’s claim is resolved.

NOW, THEREFORE, Claimant issues this Stop Payment Notice as follows:

2. DEFINITIONS

For purposes of this Notice:

“Bond” means the statutory surety bond equal to 125 percent of the Claim Amount required when the Notice is served on (i) a public entity on a public work (Cal. Civ. Code § 9350(b)(3)), or (ii) a construction lender in a private work (Cal. Civ. Code § 8530(b)(2)).

“Claim Amount” means $[AMOUNT CLAIMED], exclusive of allowable interest, attorneys’ fees, and collection costs.

“Contract Funds” means undistributed progress payments, retention, and any other money due or to become due under the Prime Contract for the Project.

“Recipient” means each party legally obligated to withhold Contract Funds upon service of this Notice, including the Owner, Public Entity, and/or Construction Lender, as applicable.

“Statutory Withholding Percentage” means 125 percent of the Claim Amount for Bonded Notices and 100 percent for Unbonded Notices.

3. OPERATIVE PROVISIONS

3.1 Demand to Withhold. Claimant hereby demands that each Recipient immediately withhold from the Contract Funds an amount not less than the Statutory Withholding Percentage of the Claim Amount, or such other amount as mandated by Cal. Civ. Code §§ 8536 or 9358.

3.2 Application of Withheld Funds. The withheld amount shall be retained until (i) Claimant’s claim is paid in full; (ii) Claimant executes and delivers a unconditional waiver and release under Cal. Civ. Code § 8138; (iii) a court of competent jurisdiction orders release; or (iv) the Notice is otherwise released in writing by Claimant.

3.3 Conditions Precedent. If a Bond is required by statute, service of this Notice is expressly conditioned upon concurrent delivery of the Bond, duly executed by an admitted surety insurer, in the form attached hereto.

4. REPRESENTATIONS & WARRANTIES

Claimant represents and warrants to each Recipient that:

a. Claimant supplied the Work for the Project in good faith and in conformity with the applicable contract documents.
b. The Claim Amount is just, due, and unpaid after allowance of all credits and offsets.
c. All statutory pre-requisites to the effectiveness of this Notice (including Preliminary Notice and, where applicable, the Bond requirement) have been satisfied.
d. Claimant has not assigned, pledged, or otherwise transferred the Claim Amount or related rights, except as disclosed in writing.

These representations survive satisfaction or release of this Notice.

5. COVENANTS & RESTRICTIONS

5.1 Cooperation. Claimant shall reasonably cooperate with Recipients, their auditors, and their legal counsel to substantiate the Claim Amount and eligibility of the Notice.

5.2 Notice of Change. Claimant shall promptly notify Recipients of any material change affecting the Claim Amount, including partial payments or credits.

5.3 No Waiver. Nothing herein shall be construed as a waiver of any mechanics lien, stop payment notice, payment bond, or other remedy available to Claimant under California law.

6. DEFAULT & REMEDIES

6.1 Events of Default. Each of the following constitutes a default by a Recipient:
i. Failure to withhold the required Contract Funds after proper service of this Notice.
ii. Improper release of withheld funds without Claimant’s written consent or a court order.

6.2 Remedies. Upon default, Claimant may, without waiver of any other rights:
a. Commence a civil action to enforce the Stop Payment Notice under Cal. Civ. Code § 8550 or § 9356.
b. Seek prejudgment attachment, injunctive relief, and recovery of attorneys’ fees and costs as permitted by statute.

7. RISK ALLOCATION

7.1 Bonding & Indemnification. If a Bond accompanies this Notice, the Surety agrees to indemnify Recipients against any liability they may incur for withholding Contract Funds in reliance on the Notice, consistent with Cal. Civ. Code § 8530(b)(2) or § 9350(b)(3).

7.2 Limitation of Recipient Liability. Recipients’ aggregate liability for complying with this Notice shall not exceed the lesser of (i) the Contract Funds properly withheld or (ii) the Statutory Withholding Percentage of the Claim Amount.

8. GENERAL PROVISIONS

8.1 Amendments; Waivers. Any amendment or release of this Notice must be in writing, signed by Claimant, and served in the manner required for original service.

8.2 Severability. If any provision of this Notice is held invalid, the remaining provisions shall continue in full force to the maximum extent permitted by law.

8.3 Counterparts; Electronic Signature. This Notice, the Verification, the Bond, and any Release may be executed in counterparts and by electronic signature with the same force as an original.

9. EXECUTION BLOCK

Claimant: [CLAIMANT LEGAL NAME]
By: __________________________________
Name: [TYPED NAME]
Title: [CAPACITY / POSITION]
Date: [DATE]

10. VERIFICATION (CAL. CODE CIV. PROC. § 2015.5)

I, [NAME], declare under penalty of perjury under the laws of the State of California that:
1. I am the [POSITION] of Claimant identified above;
2. I have read the foregoing Stop Payment Notice and know its contents; and
3. The matters stated are true of my own knowledge, except those stated on information and belief, and as to those matters I believe them to be true.

Executed on [DATE] at [CITY], California.

__________________________________
[NAME]

11. PROOF OF SERVICE AFFIDAVIT

State of California )
County of [COUNTY] ) ss.

I, [NAME OF SERVER], declare that I served a true and correct copy of the foregoing Stop Payment Notice (and Bond, if applicable) as follows:

☐ Personal delivery on [DATE] to [RECIPIENT NAME & TITLE]
☐ Certified mail, return-receipt requested, postage prepaid, on [DATE] to [ADDRESS]

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on [DATE] at [CITY], California.

__________________________________
[NAME OF SERVER]

12. OPTIONAL STATUTORY BOND

[Attach Cal. Civ. Code-compliant bond form if Notice is directed to a construction lender (private work) or public entity (public work). Minimum penal sum: 125 % of Claim Amount. Surety must be an admitted carrier authorized in California.]