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Are we protected legally from a lien if we issued joint checks to the Subcontractor and Supplier but only the supplier signed an unconditional release ?

Our Subcontractor is refusing to sign an unconditional release for the checks issued jointly with their suppliers. She will only sign the unconditional release for checks actually deposited into her bank account. The joint checks were mailed to the subcontractor but they gave them to the suppliers.

1 reply

Aug 24, 2018

I'm not entirely sure I understand the above situation. Did the subcontractor endorse joint checks but then fail to receive the funds? Were the checks passed along to the supplier without being endorsed by the subcontractor - and if so, was any payment released? When a joint check is issued, no payment should be released until that check has been endorsed by all necessary parties. Thus a subcontractor passing along a joint check to a supplier shouldn't have a perilous effect when both the sub and the supplier must endorse it before depositing. Regardless, it's not all that uncommon for a subcontractor to refuse to issue an unconditional waiver until payment has hit their bank account. In fact, waiting to issue an unconditional waiver until payment is confirmed is probably best practice - otherwise, lien rights may be waived preemptively, and a sub may be in a tight spot if something goes wrong with payment. If there's an issue with facilitating the deposit of funds for a subcontractor, requesting a conditional waiver in the meantime could be helpful. That way, once a subcontractor has received payment, their lien rights will be waived. However, if you mean that the subcontractor is passing along funds that are due to the supplier then refusing to waive amounts that were passed along to the supplier - that may be a different story. For one, if funds aren't owed to the subcontractor for those amounts, then the subcontractor shouldn't have much opposition to submitting a waiver. Regarding that must be passed along - a subcontractor wouldn't have lien rights associated with those sums anyway. But, in the case where a sub will not waive amounts earmarked for some other party, such a waiver might be completely unnecessary. If a subcontractor has been paid what they're due (and submitted an unconditional waiver for those amounts), and if the supplier has been paid what they're due (and submitted an unconditional waiver for those amounts), then all of the funds paid to both parties should be covered by a waiver anyway. Presumably, the amounts on those two waivers, when added together, would equal the total amount paid on the joint check. If I misunderstood the question, or if you have other questions, please feel free to post another question so we can better understand or clarify any issues!

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