Construction contracts often require as a condition to final payment that the contractor sign a waiver of lien and affidavit that the work has been completed and that it has been fully paid for the work performed at the project. Questions frequently arise as to the validity and effectiveness of such a waiver and release where, at the time the waiver was signed, the work was not completed and the contractor thereafter completed the additional work.
In the recent case of Leonard E. Riedl Construction, Inc. v Homeyer, the court addressed the enforceability of a lien waiver and affidavit.Background
Riedl Construction performed a construction project for the Homeyers. Towards the end of the project, Riedl's representative signed a document entitled "Contractor's Final Waiver and Affidavit," which provided that the construction project was "fully completed"; "all bills for labor and/or materials furnished in connection with the construction of said buildings and work of improvement have been fully paid"; and Riedl "waives any and all lien rights which he may have or may have had on account of or arising out of the construction of said buildings and work of improvement."
Despite Riedl's signing of that document, there was evidence which established that at the time that document was signed, the work had not been completed, and that the Homeyers had verbally agreed to make further payments for the completion of additional work. There was also evidence that the Homeyers complied with that verbal agreement by making additional payments to Riedl after Riedl's representative had signed the Final Waiver and Affidavit. Ultimately, the Homeyers did not pay Riedl for the completed work.
Riedl Construction commenced this action to recover for the unpaid balance owing to it for the additional work. At trial, the Homeyers argued that the "Contractor's Final Waiver and Affidavit" form signed by Riedl constituted a release of its claim for the additional work.Decision
The court found that although a release document will be interpreted according to its terms, where the circumstances surrounding the release and the parties' course of action demonstrate that the parties' intentions were not reflected in the terms of the release, the release will not bar the claim. Here, the course of conduct between the parties established that the work had not been completed, that the Homeyers had verbally agreed to make further payments for the completion of additional work, and that the Homeyers made these additional payments. This course of dealing was sufficient for the court to conclude that the parties did not treat the document signed by the contractor as a final and complete waiver of any further claims by Riedl Construction.Comment
Courts will generally enforce release documents to the extent that it is a true reflection of the intent of the parties. Where there is evidence that the course of conduct between the parties is completely inconsistent with the terms of the release documents, the courts will not enforce the release against the contractor.
Contractors would be well advised to carve out an exception to release documents where it is contemplated that additional work is to be performed at the time that the final lien waiver and affidavit are signed.