Subcontractors are asked to sign lien waivers and releases nearly every time they submit a pay application. But, it may be worth your time to review the language and identify unpaid work before you submit the waiver. A recent case out of North Carolina drives home this point.
Gamewell Mech, LLC v. Lend Lease (US) Construction, Inc. involved a breach of construction contract between the subcontractor and general contractor. The subcontractor signed lien waiver/releases with each pay application. Interestingly, the pay application also contained an exception for any currently unresolved claims for which written notice had been provided, and included a Schedule A form in which a subcontractor could specifically reserve its rights to unresolved claims.
The project ran into problems and Gamewell submitted change orders requesting additional compensation. Gamewell never utilized the carve out or completed Schedule A. At the conclusion of the project, Gamewell sent a demand for $2,706,228 representing costs for additional work performed and delays.
The trial court reviewed the claim and divided it between delay costs and claims for retainage and change order work. The general contractor argued that the subcontractor waived all claims by submitting waivers with each pay applications. The trial court disagreed and allowed claims for retainage and change orders, but denied all delay costs.
The trial court refused to enforce the waiver to the change order work, finding that
- The general contractor breached the contract in refusing to approve change orders
- The waiver and release documents submitted with each pay application did not cover claims based on daily changes on the job
- The subcontractor never submitted a Final Pay Application
Even though the subcontractor submitted waivers with each pay application, the trial court refused to enforce them. While the outcome was good, a subcontractor would be better served carving out an exception to the waiver to specifically identify work that has not yet been paid. If you have questions about waivers and releases, we recommend you contact an experienced construction attorney to discuss your situation.