Is this construction lien-waiver clause effective in South Dakota?
Chapter 44-9A is not the only way a South Dakota lien can be waived, and it does not say a waiver outside it is void: it supplies ONE route, expressly “in addition to all other means presently existing under law by which such liens may be waived.” What the chapter does do is set out that route exactly, and a waiver that claims to use it must meet both of its requirements. SDCL 44-9A-1: "Liens for materials, supplies, equipment, and services furnished under construction contracts to contractors or subcontractors and arising under Title 5 or Title 44 of the South Dakota Codified Laws or by virtue of the common law of this state may be expressly waived as provided in this chapter in addition to all other means presently existing under law by which such liens may be waived." The chapter's own mechanism, under SDCL 44-9A-2, is that a lien "may be waived to the extent provided in this chapter... by the endorsement of a joint check wherein the payees include the contractor or subcontractor and the person or corporation furnishing materials, supplies, equipment, and services and by the execution of a separate agreement of waiver between the maker of the joint check and such person or corporation." SDCL 44-9A-4 confirms the effect: "The endorsement of a joint check as provided herein and the execution of a separate written agreement of waiver... shall constitute an express waiver of all rights and claims under Title 5 and Title 44 of the South Dakota Codified Laws and the common law of this state against the owner or contractor and his surety to the extent of, and as of the date of, the joint check endorsed."
The trap
Chapter 44-9A's own mechanism requires TWO things together (a joint check naming both the contractor/subcontractor and the materials/services supplier as payees, AND a separate written waiver agreement between the check's maker and that supplier), so a waiver clause buried in a purchase order or general contract, without both the joint check and the separate agreement, has not used the chapter's own waiver route. SDCL 44-9A-3 adds a drafting requirement even for parties using the joint-check route: the joint check itself must carry a CONSPICUOUS provision on its reverse side referencing the separate waiver agreement and stating that the payees, by endorsing, waive their claims to the extent of the check's date and amount: a joint check without that conspicuous reverse-side language does not satisfy the chapter on its own words. Chapter 44-9A also does not displace "all other means presently existing under law" by which a lien may be waived, so a waiver executed some other way is not necessarily invalid merely because it did not follow this chapter's specific route, but no South Dakota appellate opinion applying or construing Chapter 44-9A was located, so how a court weighs a non-conforming waiver against this chapter's specific mechanism is not established here.
4 authorities
- statuteSDCL § 44-9A-1enactment date not established
The words that state the rule
Liens for materials, supplies, equipment, and services furnished under construction contracts to contractors or subcontractors and arising under Title 5 or Title 44 of the South Dakota Codified Laws or by virtue of the common law of this state may be expressly waived as provided in this chapter in addition to all other means presently existing under law by which such liens may be waived.
- statuteSDCL § 44-9A-2enactment date not established
The words that state the rule
may be waived to the extent provided in this chapter by such person or corporation by the endorsement of a joint check wherein the payees include the contractor or subcontractor and the person or corporation furnishing materials, supplies, equipment, and services and by the execution of a separate agreement of waiver between the maker of the joint check and such person or corporation.
- statuteSDCL § 44-9A-3enactment date not established
The words that state the rule
A joint check as used for the purposes provided in this chapter must have a provision on the reverse side thereof making reference to a separate written agreement of waiver between the maker and the person or corporation furnishing materials, supplies, equipment, or services to the contractor or subcontractor. Such provision must be conspicuous and mention that the payees, by their endorsements and in consideration of the payment represented by the joint check, jointly and severally waive all claims to which they might be entitled under Title 5 and Title 44 of the South Dakota Codified Laws and the common law of South Dakota for all materials, supplies, equipment, and services supplied under a clearly identified contract to the extent of and of the date of the joint check.
- statuteSDCL § 44-9A-4enactment date not established
The words that state the rule
The endorsement of a joint check as provided herein and the execution of a separate written agreement of waiver by a person or corporation furnishing materials, supplies, equipment, and services to an owner, contractor, or a subcontractor shall constitute an express waiver of all rights and claims under Title 5 and Title 44 of the South Dakota Codified Laws and the common law of this state against the owner or contractor and his surety to the extent of, and as of the date of, the joint check endorsed.