A recent opinion from the California Court of Appeal, 4th District interpreted Public Contract Code section 20104.50(b) pertaining to interest on progress payments to contractors on public projects. In a suit between a contractor and a water district, the court held that the statute requires that interest be paid on progress payments after they are due for 30 days, however an overdue progress payment does not by itself constitute a breach of contract. Assessing interest meets the legislative goal of prompt payment by compensating for delays and deterring late payment. However, the statute does not support a cause of action to sue the public entity for breach of contract every time a payment is late.
Despite this favorable ruling, public entities should attempt to process undisputed construction progress payments promptly to avoid interest penalties.
A copy of the decision can be found at Clark Bros., Inc. v. North Edwards Water Dist. (Apr. 22, 2022) 4th Dist.Ct. of Appeal D077200. https://www.courts.ca.gov/opinions/documents/D077200.PDF
For more information on public construction contract and payment issues, please contact our office. Parker & Covert LLP has offices located in southern and northern California. We invite you to visit our website at www.ParkerCovert.com.
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