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Unconditional waiver with zero amount

Our company has a history of issuing unconditional releases on progress payments with a zero amount if we have not received payment through the specified date on the release. None of our customers have even taken issue with this and they understand it means that no payment was received. Some even prefer this method. However, I am now dealing with a customer who is saying that a UP with a zero means that no payment is due and that we should have received a conditional. Have we been doing this wrong the whole time? Do I have any ground to stand on with her claim? How can I fight this?

1 reply

Dec 12, 2018

That's a fair question. As I'll explain below, exchanging an unconditional waiver for $0 and a conditional waiver for the full amount that will be paid might not be all that different in perception - but if push comes to shove, the safer of the two options is likely to utilize conditional waivers when payment hasn't been made. First - let's look at the form for California's Unconditional Waiver and Release on Progress Payment. In the first paragraph of this document, the waiver reads "IF YOU HAVE NOT BEEN PAID, USE A CONDITIONAL WAIVER AND RELEASE FORM." as required by § 8134 of the California Civil Code. That's a pretty good indicator that a conditional waiver should be used if no payment has been made. Of course, in practice, dollar amounts on unconditional waivers represent the amount that should be waived - so using a $0 waiver might not seem like a huge difference between the parties. However, the rest of the text on the California Unconditional Waiver and Release on Progress Payment could give some pause. The middle of that form reads "This document waives and releases lien, stop payment notice, and payment bond rights the claimant has for labor and service provided, and equipment and material delivered, to the customer on this job through the Through Date of this document. Rights based upon labor or service provided, or equipment or material delivered, pursuant to a written change order that has been fully executed by the parties prior to the date that this document is signed by the claimant, are waived and released by this document, unless listed as an Exception below. " Notice, that statement doesn't restrict the effectiveness of the waiver to the dollar amount on the waiver. Instead, it purports to waive lien rights up to and until the Through Date on the document. So, by the text of the waiver, when the lien waiver is exchanged, the waiver will waive all lien rights up until the Through Date - unless the unpaid amounts are set out in the Exceptions section of the waiver. So, practically, exchanging a $0 waiver that also sets out the amounts owed and unpaid in the Exceptions section might have the same effect as a conditional waiver - but the more proper route is likely to just use conditional waivers in the way the California Civil Code intends. For more background on California waivers, the following resources should be of use: California Lien Waiver Forms & Guide (Conditional & Unconditional) and the California Lien Waiver FAQs.

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