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Do I have lien rights if a contract was cancelled shortly before ithe product was due to ship?


I'm a supplier on a project in VA. Our customer ordered a custom product, and paid the initial deposit. We are close to finishing fabrication and are due to ship soon. Our customer informed us today that their customer (owner) has asked for the installation to be delayed and there is a chance they may cancel the installation completely. Our customer has asked that we ship anyways but want to know what their options are. If we ship and they try to not pay, do we have lien rights? Do we have lien rights if we don't ship? We will not be able to resell the goods. If we don't have lien rights, what are our other options to get paid?

3 replies

Oct 21, 2021

As a baseline: Materials are generally only lienable if they're actually used and incorporated into the work. There are certainly exceptions, and it can be worth diving into further, but that should be the starting point any lien rights approach for materials that haven't actually made it to the job site. Levelset discusses that idea here: Why Material Suppliers Need To Worry About “Incorporation” of Materials

As for Virginia: VA's lien statute doesn't seem to make an exception to the general "incorporation" rule like some other states do. While some states will provide an assumption of the use/incorporation of any materials actually delivered to the job site - it doesn't appear that the VA lien statute does. Still, the chances for lien rights existing will typically be greater when the fabricated materials have actually been delivered to the job site since, at that point, it's not the fabricator's fault the materials weren't incorporated. Of course, if the customer doesn't want you to deliver the materials any longer, shipping against their wishes likely wouldn't result in an improved lien rights outlook. 

Further, VA's lien statute doesn't seem to discuss or contemplate the fabrication of materials. And, without further investigation, it's not clear whether fabricators are treated differently from other material suppliers.

With all that being said - it's possible that there have been legal developments in VA that provide additional clarity and insight into how material fabricators' lien rights will be treated there. And, consulting with a VA construction lawyer - potentially one from Levelset's VA construction attorney directory - could help provide additional clarity.

Other payment recovery options

Mechanics liens are a specialized construction payment recovery tool, but there are plenty of other options for recovering payment. Sending a demand letter (potentially with the help of a lawyer) could lead to payment. Or, if you believe you're entitled to lien rights, threatening to file a mechanics lien with a Notice of Intent to Lien could lead to payment. Pursuing a claim in small claims court or through traditional litigation could work, too - and claims like breach of contract may well be available if the contract is cancelled or otherwise breached. 

Consulting with a VA construction lawyer could help decide which of these alternative payment recovery tools will work best for you, and they could also help guide the process and negotiations. Plus, your available recovery tools will likely be reliant on the terms of your contract, the content of the communications on the job, and other specific factors - and a lawyer would be able to review all the information relevant to making those determinations.

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