Safeguarding Your Construction Debts: Navigating Bad Checks, Chargebacks, and Lien Waivers in Arizona

In this blog, we will delve into the realms of bad checks, credit card chargebacks, and lien waivers. We'll examine the intersections of these elements and uncover strategies to protect your construction debts.

Why are Informed Lien Waiver Signings important?

In the construction industry, financial transactions often involve checks and credit card payments. However, a common pitfall is signing unconditional lien waivers before ensuring corresponding payments have cleared. This oversight can have serious consequences. Unconditional waivers contain broad waivers and release language that can inadvertently waive your right to recover unpaid sums. Therefore, it's vital to resist signing any unconditional waiver, whether progress or final, until you have confirmed that the payment has been successfully processed.

Understanding Conditional Waivers and Release on Progress Payment

Conditional waivers offer a solution to the risks associated with unconditional waivers. These waivers become effective only when the payment has been properly endorsed and successfully cleared by the bank. By opting for conditional waivers, you retain your rights while avoiding potential pitfalls.

Mitigating Risks: Bad Checks and Credit Card Chargebacks

Receiving notification that a check has bounced is frustrating. However, it becomes even more problematic when you've already signed a waiver relinquishing your rights to the sum in question. This scenario emphasizes the importance of ensuring that checks are clear before signing any waivers. Moreover, the time frame for credit card chargebacks can be longer than that for check clearances. It's advisable to avoid credit card payments in construction transactions due to their interference with lien rights and potential impact on the timely recording of mechanic's liens.

A.R.S. § 12-671 – Arizona's Civil 'Bad Check Statute'

Arizona's civil bad check statute, A.R.S. § 12-671, provides recourse when faced with a bad check situation. Establishing intent to defraud can be challenging in other legal contexts, but this statute offers a streamlined approach. If you receive notice of a bad check and the issuer fails to remedy the situation within 12 days, you may have grounds to take legal action.

What are the Steps to Take When Presented with a Bad Check?

Step 1 - Notify the Check Issuer: Send a written notice to the issuer of the bad check without delay.

Step 2 - Keep Protest Notices: Retain any formal protest notices received from your bank.

Step 3 - Prepare for Legal Action: Be ready to initiate a lawsuit if needed to seek remedies under A.R.S. § 12-671.

Comprehensive Remedies and Recourse

In case you encounter a bad check or credit card chargeback situation, there are several avenues for recourse:

• Bad Check Claim: If you haven't waived your rights through a lien waiver, you may pursue a bad check claim.
• Underlying Breach of Contract/Open Account Claim: Your underlying contractual claims remain intact, allowing you to seek compensation for your services.
• Mechanic's Lien or Bond Claim: By preserving your mechanic's lien or bond claim rights, you retain ]'=[the ability to secure payment.
• Unjust Enrichment Claim: Even without direct contractual privity, an unjust enrichment claim might apply if your work has gone unpaid.
• ROC No-Pay Complaint – A.R.S. § 32-1154(A)(10): Utilize the Arizona Registrar of Contractors' No-Pay Complaint to address nonpayment issues.

Key Takeaway

In the intricate landscape of construction debts, understanding the nuances of bad checks, credit card chargebacks, and lien waivers is crucial. Protect your financial interests by adopting a cautious approach to signing waivers and responding promptly to bad check situations. With a comprehensive understanding of the legal framework, you can navigate these challenges and ensure your construction projects remain financially secure.

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