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Home>Levelset Community>Legal Help>Can a general contractor legally pay a material supplier owed money by a subcontractor and then deduct that amount from what he owes the subcontractor? The material supplier did not file a prelim notice and the general is aware of this.

Can a general contractor legally pay a material supplier owed money by a subcontractor and then deduct that amount from what he owes the subcontractor? The material supplier did not file a prelim notice and the general is aware of this.

CaliforniaConstruction ContractPayment Disputes

I'm a sub that got behind paying my supplier and now the general wants to pay the supplier and deduct that from what he owes me. I have the right to deal with the supplier on my terms, no?

1 reply

Feb 6, 2018
While some other states may explicitly allow a general contractor to make payments to their subcontractor's subs and suppliers, California appears to remain silent on the subject - under the California mechanics lien statute, such a payment method does not appear to be disallowed (but not explicitly allowed, either). Ultimately, payments must be made pursuant to the contract that was signed and the relevant laws. However, if a general contractor is merely deducting payments that will be sent down the chain anyway, there may be little reason to oppose such a payment setup. Additionally, it's possible that this general contractor is making said payments as a result of California's AB 1701 going into effect last month. Under AB 1701, a general contractor may be held liable for unpaid wages down the chain - even when the GC does not have a direct contract with that party. By making payment to a supplier directly, a GC will curb some of their exposure on this front. Plus, AB 1701 allows for a GC to withhold payments to be sent down the chain under certain circumstances, which may or may not be present in this case. Ultimately, though, if payments received are equal to what would have been kept after paying a supplier, such a setup might not be the worst thing in the world.
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