An Administrator's Guide to California Private School Law

Chapter 17 – Construction

If the school is claiming liquidated or other damages, and there are not sufficient project funds to cover the school’s claims plus all of the stop payment notices, liens, punch list items, remaining work on the project, back charges, and other damages, the school may want to file a cross- complaint against the general contractor or file an action to have the funds deposited with the court, depending on the situation A bankruptcy of either the contractor or any of the subcontractors complicates stop payment notice litigation. If the contractor has filed for bankruptcy, the school should consider filing a proof of claim in the bankruptcy court to preserve the school’s right to make claim against the bankrupt estate. If in doubt, the school should seek the assistance of a bankruptcy attorney. E. S ETTLEMENT N EGOTIATION A ND A GREEMENT The school should take care negotiating and agreeing to a settlement. It should consult legal counsel and involve counsel in the negotiation and preparation of the settlement agreement. Examples of terms and conditions that may be included in a settlement agreement are as follows:  The legal names of the parties;  If payment is to be made, which party is making the payment and to whom, the amount of the payment, and the schedule for the payment;  Which party is responsible for the defense and indemnity of any pending stop payment notices, stop payment notice lawsuits, mechanics liens proceedings, or other pending claims and proceedings;  If a lawsuit is pending, it must be dismissed with prejudice;  Waiver and release of known and unknown claims, actions, and other liabilities arising from the project or the contract documents;  Which party is responsible for completing and paying for work that remains on the project;

 Cooperation, preparation, and execution of additional documents and paperwork, and such actions that may be required to close out the project, obtain approvals from government agencies (if such approvals are required) and a provision stating whether the parties are entitled or not entitled to compensation for taking these actions;  Handling of attorneys’ fees and costs incurred by the parties;  Warranties on project are to continue in full force and effect pursuant to the contract documents; and  Enforcement of settlement agreement as a stipulated judgment.

The school should likely insist that the performance bond surety, if any, be a party to the settlement so that it does not leave itself open to claims. Legal counsel should review every settlement agreement before execution.

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 591