A public works contractor submits a final payment application for $85,000. The public entity disputes $12,000 of the amount. Under prompt payment law, what amount must be paid within 30 days?
Correct Answer
B) $73,000 (undisputed amount)
California prompt payment law requires payment of undisputed amounts within 30 days, even when portions are disputed.
Why This Is the Correct Answer
Option B ($73,000 — the undisputed amount) is correct. California's prompt payment law (Public Contract Code Section 7107) requires public entities to pay the undisputed portion of a payment application within 30 days. The disputed amount ($12,000) may be withheld pending resolution, but the undisputed balance ($85,000 − $12,000 = $73,000) must be paid promptly.
Why the Other Options Are Wrong
Option A: $42,500 (50% pending resolution)
Option A ($42,500 — 50% pending resolution) is incorrect. There is no provision in California prompt payment law allowing a public entity to withhold 50% of the total pending dispute resolution. Only the specifically disputed amount may be withheld.
Option C: $0 until dispute is resolved
Option C ($0 until dispute is resolved) is incorrect. Withholding all payment while a dispute is pending violates California's prompt payment law. The undisputed portion must be released within 30 days regardless of any open dispute.
Option D: $85,000 (full amount)
Option D ($85,000 — full amount) is incorrect. The public entity is entitled to withhold the $12,000 that is legitimately disputed. Paying the full amount would mean releasing funds the entity is contesting.
Memory Technique
Remember 'Pay what you agree on, hold what you don't.' Only the contested dollars can be held back. Think of it as settling a restaurant bill — if you dispute one dish, you still pay for everything else right away.
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A contractor receives a progress payment of $18,000 from a property owner on Monday. The contractor owes subcontractors $12,000 of this amount. By what day must the contractor pay the subcontractors?