Jeff entered into a building contract with Mike under which Jeff agreed to construct a garage on Mike's lot for $60,000. Lumber Supply Company supplied the lumber at Jeff's request, but when Jeff failed to pay for the material within a few weeks after it was supplied, the company filed a construction lien for $30,000 against Mike's property. If Mike ignores the lien claim, and pays the entire $60,000 to Jeff, Mike may be obliged to pay an amount equivalent to the sum he was required to hold back over again.

Question

Quizplus · Accepted Answer

Under many jurisdictions, construction or mechanic's liens allow suppliers or subcontractors to claim a lien against the property being improved if they are not paid for materials or labor. If Mike pays Jeff without ensuring the lien is satisfied, he risks having to pay the lien amount to remove it from his property, effectively paying more than the original contract price.

Jeff Entered into a Building Contract with Mike Under Which