Electrical Contractor Asks About Partial Release Forms

laecQuestion: A contractor wants me to sign a Partial Release form on a job he hasn’t paid me for yet. Doesn’t that put me at risk of not collecting the money if I’m not really paid after I sign the release form?
– Greg Storn

Answer: The good news here is that there is an easy solution to this issue. There are four different legal documents that apply to contracted work:
1. Conditional Release Upon Progress Payment
2. Conditional Release Upon Final Payment
3. Unconditional Release Upon Partial Payment
4. Unconditional Release Upon Final Payment

The only “condition” of a Conditional Release is that the release is valid only if the money specified on the release is paid to the contractor. In other words, if you are 50% complete with a $10,000 job, you can safely sign a Conditional Release Upon Progress Payment for $5,000. If you aren’t paid the $5,000, the release is not valid and you have not given up any of your lien rights to this money.

On the other hand, if you sign and Unconditional Release, you have just given up your rights to whatever amount of money that was on the Unconditional Release from. So the rule is, don’t sigh an Unconditional Release from until the money you are releasing is in your bank account. I’m not talking about a check in your hand, either. I’m saying that you should never sign an unconditional release until that check has cleared and the funds are literally in your bank account.

Some or my company’s corporate clients always ask for a release before they will pay an invoice. No problem, we just send them a Conditional Release Upon Progress Payment or a Conditional Release Upon Final Payment. Later, after their check has cleared into our bank account, we will (if they ask) follow up with an Unconditional Release.

By the way, Conditional Release forms protect both the client and the contractor. If a client gets a Conditional Release form a contractor, they know that they are protected from getting a lien from that contractor, but only if they actually pay the contractor the money specified on the lien.

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