Contracts & ExecutionQuestion 536 of 1632

A general contractor receives a joint check made payable to BOTH the subcontractor and its material supplier. Best practice in California is for the GC to:

a.Endorse the check into the GC's account and then pay out
b.Hand the check to the supplier and skip the subcontractor
c.Get a joint check agreement and waivers before release
d.Cash the check and split it at the GC's own discretion

Explanation

The protection comes from agreeing the joint check terms before the check moves and exchanging conditional waivers and releases on the Civil Code §8132 form at release: the agreement says how the funds are allocated, and the waivers record that the money reached both payees, which is what keeps the supplier's lien off the job. Running the check through the GC's own account first turns both payees' money into the GC's and invites the very claim the joint check was meant to prevent. Paying the supplier and skipping the subcontractor leaves the sub's labor unpaid and its lien rights alive. And splitting a two-payee check at the GC's discretion is not a discretion the GC has — both payees must endorse.

Law Reference: Civil Code §8132

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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)
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