STOP PAYMENT NOTICE
(Hawaii – Construction Project)
[PARTIES]
- Claimant: [FULL LEGAL NAME], a [STATE] [ENTITY TYPE] having its principal place of business at [ADDRESS] (“Claimant”).
- Obligor: [FULL LEGAL NAME], the party in control of construction funds (e.g., Owner, Construction Lender, or Disbursing Agent) having an address at [ADDRESS] (“Obligor”).
- Direct Contractor: [FULL LEGAL NAME] having an address at [ADDRESS] (“Direct Contractor”).
- Project: The construction, improvement, or alteration commonly known as “[PROJECT NAME]” located at [PROJECT ADDRESS / TMK NO.].
Effective Date: [DATE]
Governing Law: State of Hawaii mechanics’ and materialmen’s lien law and related common-law equitable principles.
TABLE OF CONTENTS
I. Document Header
II. Definitions
III. Operative Provisions
IV. Representations & Warranties
V. Covenants & Restrictions
VI. Default & Remedies
VII. Risk Allocation
VIII. Dispute Resolution
IX. General Provisions
X. Execution Block
Appendix A – Bond to Release Stop Payment Notice (Form)
Appendix B – Release of Stop Payment Notice (Form)
I. DOCUMENT HEADER (RECITALS)
WHEREAS, Claimant has furnished certain labor, services, equipment, and/or materials (collectively, “Work”) to or for the benefit of the Project pursuant to a contract (the “Subcontract”) with [CONTRACT PARTY]; and
WHEREAS, the sum of $[AMOUNT] (the “Claimed Sum”) remains due and owing to Claimant for the Work; and
WHEREAS, under applicable Hawaii lien law, a person who has furnished Work and remains unpaid may require the person controlling construction funds to withhold sufficient monies pending resolution of such claim;
NOW, THEREFORE, Claimant issues this Stop Payment Notice (“Notice”) and demands that Obligor comply with the terms set forth herein.
II. DEFINITIONS
“Bond” means a surety bond in the penal sum of 125% of the Claimed Sum, issued by a surety licensed in Hawaii, conditioned on payment of the Claimed Sum plus costs, interest, and attorneys’ fees.
“Claim Resolution Event” means (a) written settlement and payment in full of the Claimed Sum; (b) posting of a Bond acceptable to Claimant; (c) final, non-appealable judgment disallowing the claim; or (d) any other written release executed by Claimant.
“Funds Subject to Withholding” means all monies otherwise payable or to become payable to the Direct Contractor in connection with the Project, up to the Withheld Amount.
“Withheld Amount” means the Claimed Sum plus fifteen percent (15%) as a contingency reserve for interest, costs, and attorneys’ fees, not to exceed the unpaid balance due to Direct Contractor.
[// GUIDANCE: Adjust contingency percentage in accordance with current commercial practice. 10–20 % is customary.]
III. OPERATIVE PROVISIONS
3.1 Demand for Withholding.
(a) Claimant hereby demands that Obligor immediately withhold the Withheld Amount from the Funds Subject to Withholding.
(b) The withholding shall continue until a Claim Resolution Event occurs.
3.2 Notice to Direct Contractor.
Within five (5) days after service of this Notice, Obligor shall deliver a copy of this Notice to the Direct Contractor by a method providing written proof of delivery.
3.3 Service of Notice.
This Notice shall be deemed served when delivered by (i) certified U.S. mail, return-receipt requested; (ii) courier with signed receipt; or (iii) personal service by a registered process server to the address of Obligor shown above.
3.4 Conditions Precedent/Subsequent.
(a) Claimant shall commence a mechanics’ lien or other applicable legal action within the statutory period following completion of the Work.
(b) Failure to timely commence such action shall constitute a Claim Resolution Event and entitle Obligor to release withheld funds.
IV. REPRESENTATIONS & WARRANTIES
4.1 Claimant represents and warrants that:
(a) The Claimed Sum is presently due and owing, bona fide, and not the subject of any offset or counterclaim known to Claimant.
(b) All laborers, material suppliers, and lower-tier subcontractors engaged by Claimant have been paid in full or will be paid promptly upon receipt of the Claimed Sum.
(c) Claimant holds all licenses required under Hawaii law to perform the Work.
(d) Claimant has complied with all contractual and statutory notice prerequisites for asserting lien-related claims.
4.2 Survival.
The representations and warranties in this Section IV shall survive until a Claim Resolution Event occurs.
V. COVENANTS & RESTRICTIONS
5.1 Claimant’s Covenants.
(a) Claimant shall prosecute its claim diligently and in good faith.
(b) Upon occurrence of a Claim Resolution Event, Claimant shall execute and deliver to Obligor a Release of Stop Payment Notice substantially in the form attached as Appendix B.
5.2 Obligor’s Covenants.
(a) Obligor shall withhold and segregate the Withheld Amount and not disburse or encumber such funds except as expressly permitted herein.
(b) Obligor shall promptly notify Claimant of any Bond tendered by Direct Contractor or third party.
5.3 Bonding-Off Procedure.
Upon receipt of a Bond meeting the requirements of this Notice, Obligor may release the Withheld Amount to the extent covered by the Bond, provided that written notice and a copy of the Bond are served on Claimant at least five (5) business days before release.
VI. DEFAULT & REMEDIES
6.1 Events of Default.
(a) Obligor’s disbursement of any portion of the Withheld Amount in violation of this Notice.
(b) Claimant’s failure to commence legal action within the statutory period.
6.2 Cure Period.
A default under Section 6.1(a) may be cured within five (5) business days after written notice from Claimant by reinstating the Withheld Amount or posting a Bond.
6.3 Remedies.
(a) Specific Performance / Injunctive Relief compelling compliance with withholding obligations.
(b) Money damages in the amount wrongfully disbursed, plus interest at the maximum rate allowed by law.
(c) Reasonable attorneys’ fees and costs incurred in enforcing this Notice.
(d) Any other relief available at law or in equity.
VII. RISK ALLOCATION
7.1 Indemnification – Wrongful Notice.
Claimant shall indemnify, defend, and hold harmless Obligor and Direct Contractor from and against any Losses arising out of a Stop Payment Notice that is found by a court of competent jurisdiction to be willfully exaggerated or fraudulently filed.
7.2 Limitation of Liability – Obligor.
Obligor’s liability for failure to withhold or for improper release of funds shall not exceed the Withheld Amount; consequential or punitive damages are expressly disclaimed.
7.3 Insurance.
Claimant represents that it maintains commercial general liability and workers’ compensation insurance in at least the minimum amounts required by contract and statute.
7.4 Force Majeure.
Neither party shall be liable for failure to perform obligations hereunder caused by events beyond its reasonable control, provided that such party gives prompt notice and uses commercially reasonable efforts to mitigate the effects.
VIII. DISPUTE RESOLUTION
8.1 Governing Law.
This Notice and all related disputes shall be governed by the laws of the State of Hawaii, without regard to conflict-of-law principles.
8.2 Forum Selection.
The parties submit to the exclusive jurisdiction of the state courts of the State of Hawaii located in the county where the Project is situated.
8.3 Arbitration.
Not applicable.
8.4 Jury Trial Waiver.
Not applicable.
8.5 Equitable Relief.
Nothing herein limits the right of any party to seek injunctive or equitable relief, including but not limited to an order directing Obligor to withhold or release funds in accordance with this Notice.
IX. GENERAL PROVISIONS
9.1 Amendments & Waivers.
Any amendment or waiver must be in a written instrument signed by the party against whom enforcement is sought.
9.2 Assignment.
Neither this Notice nor any rights hereunder may be assigned without the prior written consent of the non-assigning party, except that Claimant may assign its rights to payment as collateral to a financing institution.
9.3 Successors & Assigns.
This Notice shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
9.4 Severability.
If any provision is declared unenforceable, the remaining provisions shall remain in full force, and the unenforceable provision shall be reformed to the minimum extent necessary to achieve its intent.
9.5 Integration.
This Notice constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior negotiations or understandings.
9.6 Counterparts; Electronic Signatures.
This Notice may be executed in counterparts, each of which is deemed an original, and all of which constitute one instrument. Signatures transmitted by electronic means shall be deemed original signatures for all purposes.
X. EXECUTION BLOCK
IN WITNESS WHEREOF, the undersigned have executed this Stop Payment Notice as of the Effective Date written above.
CLAIMANT:
[LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________
OBLIGOR (Acknowledgment of Receipt Only):
[LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________
[Optional Notary Acknowledgment – Hawaii]
APPENDIX A
FORM OF BOND TO RELEASE STOP PAYMENT NOTICE
[// GUIDANCE: Attach standard surety bond language; penal sum 125 % of Claimed Sum; obligee = Claimant; conditioned upon payment of judgment, interest, fees.]
APPENDIX B
FORM OF RELEASE OF STOP PAYMENT NOTICE
To: [OBLIGOR]
Project: [PROJECT NAME / ADDRESS]
Claimant hereby certifies that (i) the Stop Payment Notice dated [DATE] is released, (ii) no further sums are due under said Notice, and (iii) Obligor is authorized to disburse all previously withheld funds.
CLAIMANT:
[LEGAL NAME]
By: ____
Name: ____
Title: _____
Date: _________
Notary Acknowledgment (if required)
[// GUIDANCE:
1. Confirm Hawaii administrative and procedural rules governing service, bonding, and release—statutory citations intentionally omitted per instruction.
2. Verify the statutory lien-enforcement deadline (typically 45 days from project completion) and adjust Section 3.4 accordingly.
3. For lender recipients, synchronize this Notice with the construction loan agreement’s draw procedures.
4. If multiple claimants are anticipated, consider a registry of Stop Payment Notices to avoid priority disputes.
]