Construction,
Contracts
Mar. 13, 2024
California court interprets ‘good faith dispute’ exception for prompt payment penalties
In a case of first impression, the 1st District Court of Appeals in California determined that a project owner’s claim for liquidated damages constitutes a good faith dispute under Civil Code section 8800, allowing the project owner to withhold up to 150% of the disputed amount without being subject to prompt payment penalties.
Garret D. Murai
Partner
Nomos LLP
Garret is the editor of the California Construction Law Blog at www.calconstructionlawblog.com.
California has a number of prompt payment penalty statutes on the books. Among them is Civil Code section 8800, which requires project owners on private works projects to pay progress payments to direct contractors within 30 days after demand for payment pursuant to a contract or be subject to prompt payment penalties of two percent (2%) per month on the amount wrongfully withheld. Like California's other prompt payment penalty statutes, however, there is an importan...
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