STOP NOTICE
(Construction Project – Delaware)
TABLE OF CONTENTS
- DOCUMENT HEADER
- DEFINITIONS
- OPERATIVE PROVISIONS
- REPRESENTATIONS & WARRANTIES
- COVENANTS & RESTRICTIONS
- DEFAULT & REMEDIES
- RISK ALLOCATION
- DISPUTE RESOLUTION
- GENERAL PROVISIONS
- EXECUTION BLOCK
[// GUIDANCE: This template is drafted for use on private construction projects located in Delaware and invokes the funds-withholding mechanism contemplated under Title 25, Chapter 27 of the Delaware Code (Mechanics’ Liens). Customize bracketed items and confirm statutory time periods prior to service.]
1. DOCUMENT HEADER
STOP NOTICE (“Notice”) made and entered into this [EFFECTIVE DATE] (the “Effective Date”) by [CLAIMANT LEGAL NAME], a [STATE OF ORGANIZATION] [ENTITY TYPE] (“Claimant”), and directed to:
- [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE] (“Owner”);
- [DIRECT CONTRACTOR LEGAL NAME], a [STATE] [ENTITY TYPE] (“Direct Contractor”); and, if applicable,
- [CONSTRUCTION LENDER LEGAL NAME], a [STATE] [BANK/FI] (“Lender”).
Project: “[PROJECT NAME / DESCRIPTION]” located at [PROJECT ADDRESS, COUNTY, DELAWARE] (the “Project”).
Consideration: Claimant furnished labor, services, equipment and/or materials for the improvement of the Project and is unpaid in the principal amount of $[CLAIMED AMOUNT] (the “Claimed Amount”).
2. DEFINITIONS
For purposes of this Notice (capitalized terms appear alphabetically):
“Applicable Law” – Title 25, Chapter 27 of the Delaware Code and any regulations, case law, or local ordinances governing mechanics’ liens, stop-notice rights, bonding, and related procedures.
“Bond” – A payment bond (corporate surety, rating A- or better) issued pursuant to Applicable Law in a penal sum not less than 150% of the Claimed Amount that secures payment of the Claimed Amount, interest, and costs.
“Claimant” – The party identified in the Document Header asserting the right to withhold funds.
“Claimed Amount” – The unpaid contract balance of $[CLAIMED AMOUNT] exclusive of statutory interest, attorney’s fees, and allowable costs.
“Construction Lender” or “Lender” – Any mortgagee, deed-of-trust beneficiary, or other person or entity advancing construction financing for the Project.
“Direct Contractor” – The person or entity in contractual privity with Owner for construction of the Project.
“Effective Date” – The date set forth in the Document Header on which service of this Notice is deemed complete.
“Final Release” – A written, unconditional waiver and release of the Stop Notice duly executed by Claimant in recordable form.
“Notice” or “Stop Notice” – This instrument and accompanying statutory declaration(s), together with all exhibits, attachments, and proofs of service.
“Owner” – The fee title owner(s) of the Project real property on the Effective Date.
“Project” – The improvement described in the Document Header together with the associated real property.
“Retention Funds” – Monies otherwise due or to become due from Owner (or Lender) to Direct Contractor in an amount equal to, but not exceeding, the Claimed Amount, plus statutory interest and costs.
3. OPERATIVE PROVISIONS
3.1 Service of Stop Notice
(a) Claimant hereby gives written notice under Applicable Law that the Claimed Amount remains unpaid and directs Owner (and, if applicable, Lender) to withhold from any payments otherwise due or to become due to Direct Contractor sums not less than the Claimed Amount.
(b) Concurrently herewith, Claimant is serving this Notice on each party listed in Section 1 by [SELECT: certified mail, return receipt requested / hand delivery / statutory electronic service], together with a Verified Statement of Delivery.
[// GUIDANCE: Verify permissible service methods under current Delaware court rules and mechanic’s-lien statute.]
3.2 Directive to Withhold; Trust Character of Funds
Upon receipt of this Notice, each addressee shall hold the Retention Funds in trust for the benefit of Claimant until:
1. Claimant receives full payment and delivers a Final Release;
2. A Bond satisfying Section 3.4 is posted; or
3. A final non-appealable order of a court of competent jurisdiction directs disposition of the Retention Funds.
3.3 Duration; Lien Filing Obligations
This Stop Notice remains effective for [90] days after the Effective Date unless extended by written agreement or the timely commencement of an action to enforce Claimant’s mechanic’s lien under Applicable Law. Owner may release Retention Funds after such period absent (i) receipt of written notice of a filed lien action or (ii) entry of a court order continuing the withholding.
3.4 Bonding-Around Procedure
(a) Owner or Direct Contractor may discharge the withholding obligation by procuring and delivering to Claimant and, if applicable, Lender, a Bond meeting the definition in Section 2.
(b) Upon confirmed receipt of the Bond, Claimant will execute and deliver a Conditional Release of Stop Notice within three (3) Business Days.
(c) Failure to provide a conforming Bond renders any premature release of Retention Funds an Event of Default (Section 6.1).
3.5 Release Procedure
Upon (i) receipt of full payment of the Claimed Amount (certified funds or wire transfer) and (ii) clearance of such funds, Claimant shall furnish a Final Release within two (2) Business Days.
3.6 Interest on Withheld Funds
Retention Funds shall accrue simple interest at [X]% per annum from the Effective Date until the earliest of (i) unconditional release to Claimant, (ii) posting of a Bond, or (iii) final judicial determination that no sum is due Claimant.
4. REPRESENTATIONS & WARRANTIES
4.1 Claimant represents and warrants to each addressee that:
(a) Claimant is duly organized, validly existing, and in good standing under the laws of its state of organization.
(b) Claimant supplied labor, services, equipment and/or materials of a value not less than the Claimed Amount for the Project pursuant to a contract with [NAME OF CONTRACTING PARTY].
(c) All labor, services, equipment, and/or materials were actually furnished to the Project and properly incorporated into the work, and the contractual payment for same is past due.
(d) Claimant has complied with all notice, timing, and filing prerequisites set forth under Applicable Law to perfect the rights asserted herein.
(e) No previous waiver or release of Claimant’s mechanic’s-lien or stop-notice rights, whether conditional or unconditional, applies to the Claimed Amount.
4.2 The foregoing representations and warranties survive until the earlier of (i) full payment and Final Release, or (ii) expiration of the limitations period for any action arising out of this Notice.
5. COVENANTS & RESTRICTIONS
5.1 Owner Covenants
(a) To segregate Retention Funds in a separate, non-commingled account within two (2) Business Days after receipt of this Notice.
(b) To refrain from disbursing Retention Funds except as expressly permitted under Section 3.
(c) To provide Claimant, within five (5) Business Days after written request, reasonable evidence of compliance with this Section.
5.2 Claimant Covenants
(a) To pursue collection of the Claimed Amount with reasonable diligence, including the timely commencement of a mechanic’s-lien action when required.
(b) To execute and deliver a Final Release promptly upon satisfaction of Section 3.5.
(c) Not to unreasonably withhold, condition, or delay any release required under this Notice.
5.3 Restrictions
Neither Owner nor Direct Contractor shall assign, pledge, or otherwise transfer any interest in Retention Funds inconsistent with the trust obligations created by this Notice.
6. DEFAULT & REMEDIES
6.1 Events of Default
The following constitute “Events of Default”:
1. Owner or Lender disburses any portion of the Retention Funds in violation of Section 3.2 or Section 5.1.
2. Failure of Owner or Direct Contractor to post a conforming Bond within the time specified in a written demand by Claimant.
3. Any material breach of the covenants contained in Section 5.
6.2 Cure Period
Claimant shall provide written notice of default; the breaching party has five (5) Business Days to cure, except that improper disbursement of Retention Funds is an immediate default not subject to cure.
6.3 Remedies
Upon an Event of Default, Claimant may, without limitation:
(a) Seek immediate injunctive relief compelling compliance with this Notice.
(b) Recover the Claimed Amount, accrued interest, and reasonable attorney’s fees and costs from the party in default.
(c) Pursue any other remedy available under Applicable Law, equity, or contract.
7. RISK ALLOCATION
7.1 Indemnification
(a) Bonding Indemnity – Direct Contractor and, if Bond is posted, the surety jointly and severally indemnify and hold harmless Claimant against any loss, damage, cost, or expense (including attorney’s fees) arising out of or relating to enforcement of the Bond.
(b) False Claim Indemnity – If any representation in Section 4 is judicially determined to be materially false, Claimant shall indemnify Owner and Lender for actual damages (exclusive of consequential or punitive damages) incurred as a direct result of the wrongful withholding.
7.2 Limitation of Liability
Except for damages arising from willful misconduct or gross negligence, the liability of Owner and Lender under this Notice is capped at the Retention Funds plus statutory interest and recoverable costs.
7.3 Force Majeure
No party is liable for failure to perform a non-monetary obligation when such failure is due to Acts of God, governmental acts, labor disturbances, or any cause beyond the party’s reasonable control; provided, however, that monetary obligations (including retention of funds) are not excused.
8. DISPUTE RESOLUTION
8.1 Governing Law – This Notice and any related dispute are governed by the laws of the State of Delaware, including Applicable Law, without regard to conflict-of-law principles.
8.2 Forum Selection – The parties submit to the exclusive jurisdiction of the state courts located in [COUNTY], Delaware for any action arising out of or relating to this Notice.
8.3 Arbitration – Not applicable (per metadata).
8.4 Injunctive Relief – Nothing herein limits Claimant’s right to seek provisional or permanent injunctive relief to maintain the status quo or enforce withholding of funds.
9. GENERAL PROVISIONS
9.1 Amendments – Any amendment or waiver must be in a writing signed by Claimant and Owner (and Lender, if applicable).
9.2 Assignment – Claimant may not assign this Notice or any related rights without Owner’s prior written consent, except to a surety or lender providing financing to Claimant. Owner may not assign obligations pertaining to Retention Funds except in connection with a transfer of title to the Project accompanied by an express assumption agreement.
9.3 Successors & Assigns – This Notice binds and benefits the parties and their respective successors and permitted assigns.
9.4 Severability – Any provision held unenforceable shall be severed and the remaining provisions enforced to the fullest extent permitted by law.
9.5 Entire Agreement – This Notice constitutes the entire agreement of the parties with respect to the subject matter and supersedes all prior communications relating thereto.
9.6 Counterparts – This Notice may be executed in counterparts, each of which is deemed an original and all of which together constitute one instrument.
9.7 Electronic Signatures – Signatures delivered via electronic transmission (e.g., PDF, DocuSign) are deemed original for all purposes.
10. EXECUTION BLOCK
[// GUIDANCE: For maximum enforceability, obtain notarized signatures from Claimant. Delaware notarial law permits remote online notarization under certain conditions.]
CLAIMANT
[NAME]
[Title]
[CLAIMANT LEGAL NAME]
State of __ )
County of _ ) ss.:
Subscribed and sworn before me on this ___ day of _, 20_, by ___ as ___ of [CLAIMANT LEGAL NAME].
Notary Public
My Commission Expires: _____
ACKNOWLEDGMENT OF RECEIPT (OPTIONAL BUT RECOMMENDED)
The undersigned hereby acknowledge receipt of this Stop Notice on the Effective Date stated above and agree to comply with its terms pending resolution.
OWNER:
_____ Date: ____
[NAME & TITLE]
[OWNER LEGAL NAME]
DIRECT CONTRACTOR:
_____ Date: ____
[NAME & TITLE]
[DIRECT CONTRACTOR LEGAL NAME]
LENDER (if any):
_____ Date: ____
[NAME & TITLE]
[CONSTRUCTION LENDER LEGAL NAME]
Prepared in conformity with Title 25, Chapter 27 of the Delaware Code (Mechanics’ Liens).