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

If Mike ignores the lien claim and pays Jeff the entire $60,000 without first satisfying the lien, he may be liable to pay the amount of the lien again. This is because the lien creates an encumbrance on Mike's property, and unless it is satisfied or discharged, it may remain as a valid claim against the property. This means that if Mike wants to clear his property of the lien, he may have to pay the Lumber Supply Company the $30,000 it is claiming, in addition to the $60,000 he paid Jeff. Therefore, Mike should first ensure that all liens and other encumbrances are satisfied before making full payment to Jeff.

Jeff Entered into a Building Contract with Mike Under Which