CSLB Law & Business ExamInsurance and LiensHard
A general contractor wants to sign a conditional waiver and release upon progress payment before actually receiving a subcontractor's check. What is the legal effect of this document once the payment is later honored?
- AThe release automatically converts into an unconditional release after 30 days
- BThe release is effective immediately upon signing regardless of whether payment clears
- CThe release becomes effective only when the underlying payment actually clears, such as a check being honored by the bank
- DThe release voids the subcontractor's right to file a mechanics lien for future unpaid work
Show answer & explanationAnswer & explanation
Correct answer: C. The release becomes effective only when the underlying payment actually clears, such as a check being honored by the bank
A conditional waiver and release upon progress payment is contingent on the payment actually being received and honored (e.g., the check clearing). If the check bounces, the release never takes effect and lien rights are preserved for that payment.
Why the other options are wrong
- A. There is no automatic conversion rule after a set number of days.
- B. This describes an unconditional release, not a conditional one.
- D. The release only pertains to the specific progress payment covered, not future work.
Conditional Waiver and Release Upon Progress Payment
A statutory release that only becomes effective once the specific progress payment it covers is actually received and honored, such as a check clearing.
- Protects the claimant if the payment check bounces
- Only covers the specific payment referenced, not future work
- Contrasts with unconditional release, which is effective immediately upon signing
Memory trick: Conditional release waits for the check to actually clear.