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Stop Notice that has been Bonded around

CaliforniaStop Notice

If the Public Entity bonded around our Stop Notice; 1. How would we know if this took place? 2. Does this extend the Stop Notice from 90 days to 180 days?

1 reply

Sep 2, 2021

If a stop payment notice has been bonded around on a public project, it is likely that the direct contractor (not the public entity) posted the release bond. Civil Code 9364 provides:

(a) A public entity may, in its discretion, permit the direct contractor to give the public entity a release bond.  The bond shall be executed by an admitted surety insurer, in an amount equal to 125 percent of the claim stated in the stop payment notice, conditioned for the payment of any amount the claimant recovers in an action on the claim, together with court costs if the claimant prevails.

(b) On receipt of a release bond, the public entity shall not withhold funds from the direct contractor pursuant to the stop payment notice.

(c) The surety on a release bond is jointly and severally liable to the claimant with the sureties on any payment bond given under Chapter 5 (commencing with Section 9550 ).

Civil Code section 9502 provides:

(a) The claimant shall commence an action against the public entity and the direct contractor to enforce payment of the claim stated in a stop payment notice at any time after 10 days from the date the claimant gives the stop payment notice.

(b) The claimant shall commence an action against the public entity and the direct contractor to enforce payment of the claim stated in a stop payment notice not later than 90 days after expiration of the time within which a stop payment notice must be given.

(c) An action under this section may not be brought to trial or judgment entered before expiration of the time provided in subdivision (b).

(d) If a claimant does not commence an action to enforce payment of the claim stated in a stop payment notice within the time provided in subdivision (b), the notice ceases to be effective and the public entity shall release funds withheld pursuant to the notice.

Often times, the public entity will provide you with a copy of the release bond quickly so I suggest calling and emailing the public entity. The direct contractor will also likely provide you a copy of the release bond. While time to file suit may be extended if a release bond is indeed provided, it is always wise to quickly move forward to enforce the stop payment notice claim if you are unsure the public entity has accepted the release bond.

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