Is there a California Civil Code section which limits the amount of progress payments to the actual cost of materials and labor plus Overhead & profit?
1 reply
May 25, 2020
I'm not sure what you mean by "limits the amount of progress payments." The Civil Code does not limit a contract to the cost of labor and materials plus overhead and profit. In other words, you can enter into a contract to pay a stipulated sum for a work of improvement, in which case the progress payments would be based on the percentage of the work complete and could exceed the cost of the work plus a fee. However, there is a Business & Professions Code section (7108) that restricts the use of funds paid by the owner for the work. And a contractor that submits a progress payment application for labor and materials that were not furnished to the project could be liable for fraud. So there are general limitations on submitting a progress payment application for more than the work furnished or diverting progress payments from the project. Feel free to follow up if that didn't answer your question.