STOP PAYMENT NOTICE

(Construction Project – State of North Dakota)

TABLE OF CONTENTS

1. Document Header ................................................................................. 2
2. Definitions ............................................................................................. 3
3. Operative Provisions ............................................................................. 4
4. Representations & Warranties ................................................................. 6
5. Covenants & Restrictions ....................................................................... 7
6. Default & Remedies ............................................................................ 8
7. Risk Allocation .................................................................................. 9
8. Dispute Resolution ............................................................................. 10
9. General Provisions ............................................................................. 11
10. Execution Block ............................................................................... 13
11. Exhibits ............................................................................................ 14

[// GUIDANCE: Remove the Table of Contents for shorter filings or where prohibited by local rules.]

1. DOCUMENT HEADER

STOP PAYMENT NOTICE (this “Notice”) is dated as of [EFFECTIVE DATE] (the “Effective Date”) and issued by [CLAIMANT LEGAL NAME], a [STATE] [ENTITY TYPE] (“Claimant”), to:

1. [OWNER LEGAL NAME], a [STATE] [ENTITY TYPE] (“Owner”);
2. [CONSTRUCTION LENDER LEGAL NAME] (“Lender”), if any; and
3. [DIRECT CONTRACTOR LEGAL NAME] (“Prime Contractor”).

Collectively, Owner, Lender, and Prime Contractor are the “Obligors” and each an “Obligor.”

Recitals

A. Claimant furnished labor, services, equipment, and/or materials for the improvement of real property commonly known as [PROJECT ADDRESS / LEGAL DESCRIPTION] (the “Project”) pursuant to that certain agreement dated [CONTRACT DATE] between Claimant and Prime Contractor (the “Underlying Contract”).

B. As of the Effective Date, Claimant is owed $[CLAIM AMOUNT] (the “Claim”), exclusive of interest, costs, and attorneys’ fees.

C. Pursuant to North Dakota Century Code (“N.D.C.C.”) Title 35, Chapter 27 (Construction Lien Law) (the “Lien Law”), Claimant is entitled to (i) a construction lien against the Project, and (ii) demand that sufficient undisbursed project funds be withheld pending payment, bonding, or release of the Claim.

D. Claimant issues this Notice to preserve its lien rights and to require the Obligors to withhold funds otherwise payable to the Prime Contractor as security for the Claim.

NOW, THEREFORE, Claimant hereby delivers this Notice and demands compliance with the provisions set forth below.

2. DEFINITIONS

For purposes of this Notice, capitalized terms have the meanings set forth below:

“Bond” means a surety bond (or an alternate form of collateral permitted under the Lien Law) conditioned upon the payment of the Claim, issued by a surety licensed to transact business in North Dakota and meeting the requirements of Section 6.2.

“Claim” has the meaning provided in Recital B.

“Claimant” has the meaning provided in the Document Header.

“Effective Date” means the date first written above.

“Lien Law” has the meaning provided in Recital C.

“Notice” means this Stop Payment Notice and all attached exhibits.

“Obligor(s)” has the meaning provided in the Document Header.

“Prime Contractor” has the meaning provided in the Document Header.

“Project” has the meaning provided in Recital A.

“Release Notice” means the written release of this Stop Payment Notice substantially in the form attached hereto as Exhibit B.

3. OPERATIVE PROVISIONS

3.1 Stop-Payment Demand

Upon receipt of this Notice, each Obligor shall immediately withhold from any undisbursed construction funds or future progress payments otherwise due to the Prime Contractor an amount not less than the Claim plus twenty percent (20%) for anticipated interest, costs, and attorneys’ fees (the “Withheld Funds”).

3.2 Duration of Withholding

The Withheld Funds shall be retained until the earliest to occur of:
a. payment in full of the Claim to Claimant;
b. delivery to Claimant of a Bond that satisfies Section 6.2;
c. written waiver or Release Notice executed by Claimant; or
d. final, non-appealable court order directing disposition of the Withheld Funds.

3.3 Service & Proof of Service

a. Method. Claimant shall serve this Notice in any manner permitted under N.D.C.C. § 31-04-05, including certified mail, return receipt requested, or personal delivery with signed acknowledgment.
b. Proof. Claimant shall contemporaneously execute the Proof of Service attached hereto as Exhibit A and retain the original for evidentiary purposes.

3.4 Deadline to Commence Enforcement Action

If the Claim remains unpaid, Claimant shall commence an action to enforce its lien and this Notice within [STATUTORY PERIOD, e.g., 3 years] after its last furnishing to the Project or such other period as the Lien Law mandates. Failure to commence timely action may result in discharge of the Withheld Funds.

[// GUIDANCE: Verify current statutory limitations period before finalizing.]

4. REPRESENTATIONS & WARRANTIES

4.1 Claimant represents and warrants as of the Effective Date that:
a. the Claim is valid, just, and due in the amount stated, subject only to credits and offsets specifically disclosed herein;
b. Claimant is duly licensed and in compliance with all applicable laws required to furnish labor, services, equipment, or materials to the Project;
c. Claimant has not received payment, security, or release of the Claim; and
d. Claimant’s execution, delivery, and performance of this Notice do not violate any agreement binding upon Claimant.

4.2 Survival. The representations and warranties contained in this Section shall survive satisfaction or release of the Claim.

5. COVENANTS & RESTRICTIONS

5.1 Claimant covenants to promptly execute and deliver a Release Notice within [5] Business Days after receipt of good-funds payment in full or Bond compliant with Section 6.2.

5.2 Each Obligor covenants not to disburse the Withheld Funds except as permitted under Section 3.2.

5.3 Each Obligor shall preserve all project books and records relating to payments on the Project for at least [2] years following final resolution of the Claim and shall allow Claimant reasonable inspection upon written request.

6. DEFAULT & REMEDIES

6.1 Events of Default

The following constitute an “Event of Default”:
a. failure of any Obligor to withhold the Withheld Funds as required by Section 3.1;
b. disbursement of any portion of the Withheld Funds in contravention of this Notice; or
c. failure of Claimant to timely commence an enforcement action as required by Section 3.4.

6.2 Bond to Release Withheld Funds

An Obligor may cure an Event of Default under Section 6.1(a) or (b) by delivering to Claimant a Bond in a penal sum not less than one hundred fifty percent (150%) of the Claim. The Bond shall name Claimant as sole obligee and be conditioned upon payment of any final judgment or settlement relating to the Claim, including interest and attorneys’ fees.

6.3 Remedies

a. Injunctive Relief. Claimant is entitled to injunctive relief to enforce withholding of the Withheld Funds.
b. Monetary Relief. In addition to the Claim, the responsible Obligor shall be liable for all resultant damages, interest at the statutory rate under N.D.C.C. § 47-14-05, and reasonable attorneys’ fees and costs.
c. Cumulative Remedies. Rights under this Notice are cumulative of, and not exclusive to, any rights under the Lien Law or other applicable law.

7. RISK ALLOCATION

7.1 Indemnification for Wrongful Disbursement
Each Obligor that disburses Withheld Funds in violation of this Notice shall indemnify, defend, and hold harmless Claimant from and against any loss, cost, or expense (including reasonable attorneys’ fees) arising therefrom.

7.2 Limitation of Liability
Except for an Obligor’s gross negligence or willful misconduct, the aggregate liability of any Obligor under this Notice shall not exceed the Withheld Funds, together with statutory interest and recoverable costs.

7.3 Force Majeure
No Obligor shall be liable for delay in compliance caused by events beyond its reasonable control; provided, however, that such Obligor shall use commercially reasonable efforts to mitigate the effects of any force-majeure event.

8. DISPUTE RESOLUTION

8.1 Governing Law
This Notice shall be governed by and construed in accordance with the laws of the State of North Dakota, including the Lien Law, without regard to conflict-of-law principles.

8.2 Forum Selection
Any action arising out of or relating to this Notice shall be brought exclusively in the state courts of competent jurisdiction located in [COUNTY, ND].

8.3 Injunctive Relief Preservation
Nothing herein shall limit Claimant’s right to seek provisional, equitable, or injunctive relief to preserve the Withheld Funds.

[// GUIDANCE: Arbitration and jury-trial waiver omitted as per user metadata.]

9. GENERAL PROVISIONS

9.1 Amendments & Waivers
No amendment or waiver of any provision of this Notice shall be effective unless in writing and signed by Claimant and the affected Obligor.

9.2 Assignment
Claimant may assign its rights under this Notice in connection with an assignment of the Claim; any other assignment is void without prior written consent of the non-assigning parties.

9.3 Successors & Assigns
This Notice is binding upon and inures to the benefit of the parties and their respective legal representatives, successors, and permitted assigns.

9.4 Severability
If any provision of this Notice is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be reformed to the minimum extent necessary to effectuate the parties’ intent.

9.5 Entire Agreement
This Notice, together with its exhibits, constitutes the entire understanding of the parties with respect to the subject matter and supersedes all prior notices or agreements relating thereto.

9.6 Counterparts; Electronic Signatures
This Notice may be executed in multiple counterparts, each of which is deemed an original, and all of which together constitute one instrument. Signatures delivered by electronic means (e.g., PDF, DocuSign) are deemed originals for all purposes.

10. EXECUTION BLOCK

IN WITNESS WHEREOF, the undersigned has executed this Stop Payment Notice as of the Effective Date.

[// GUIDANCE: Add notarization if required for recordable notices under county recorder practice.]

11. EXHIBITS

• Exhibit A – Proof of Service Affidavit
• Exhibit B – Form of Release Notice

EXHIBIT A

PROOF OF SERVICE AFFIDAVIT

State of __ )
County of __ ) ss.

I, [NAME], declare under penalty of perjury that:

1. I am over the age of eighteen (18) and not a party to the within action.
2. On [DATE], I served the foregoing Stop Payment Notice on the following parties:

a. Owner: [OWNER ADDRESS]
b. Lender: [LENDER ADDRESS]
c. Prime Contractor: [CONTRACTOR ADDRESS]

3. Service was made by:
   ☐ Certified Mail, Return Receipt Requested
   ☐ Personal Delivery (proof of receipt attached)
   ☐ Other: ________

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

Signature: ____
Printed Name: ___

EXHIBIT B

FORM OF RELEASE NOTICE

To: [OWNER LEGAL NAME]
[LENDER LEGAL NAME]
[DIRECT CONTRACTOR LEGAL NAME]

Reference is made to that certain Stop Payment Notice dated [ORIGINAL DATE] (the “Notice”). Claimant hereby acknowledges receipt of payment/Bond satisfactory under Section 6.2 of the Notice and releases the Notice in full effective as of the date set forth below.

Date: ______

[// GUIDANCE: This template is drafted to satisfy North Dakota Construction Lien Law requirements for a stop-payment mechanism. Practitioners must (1) confirm current statutory language and deadlines, (2) ensure service conforms to evidentiary rules, and (3) adapt bonding percentages if the legislature amends N.D.C.C. Title 35. Always record the underlying lien within statutory timelines to maintain priority.]