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Question DetailsAsked on 5/21/2015

in the state of california, are contractors required to give customers copies of original material receipts?

I am a contractor in the state of California and have a detailed contract that was signed by the customer. It included all labor and material expenses. The customer agreed to the contract and the work was completed in full with all city inspections approved and passed. Now that the contract is completed, the owner is requesting copies of all material receipts and purchases before I am given my final payment. It was never discussed prior to the job that receipts would be required. Is there a law that requires me to submit all receipt copies to the customer in the state of California?

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It has been a long time since I worked there, so can't speak to California laws, nor am I a lawyer. But under the Uniform Commercial Code, which California has incorporated into its law (with possibly a few modification), a client who is being billed for materials, supplies, subcontracts, etc as separate items (with or without a contractual markup) has an audit right - the right to see proof that those expenses were actually incurred and correctly entered in the invoices. Ditto for timesheets if being billed by the hour. So, for T&M (Time and Materials) type jobs he does have a right to at least see the documentation, and if he requests copies of more than YOUR totalled invoice to him you could probably charge a reasonable copying charge for them. However, depending on which terms of the UCC apply to your contract, you might have to include them with the invoice at billing time - that sort of billing documentation detail is usually spelled out in a contract.

Also, for any items that have manufacturer warranties or return policies, part of the "free and unrestricted delivery" of those goods necessarily includes providing the customer with all necessary receipts (original if required by warranty), installer certifications, warranty forms or registrations, etc needed for him to be able to prove purchase date and make warranty claims.

If your contract was for a lump sum, or several lump sum bid items for different work products, without labor or materials being separately called-out as reimbursable items, then the contract price agreement was for those specified lump sum contract amounts (or unit prices like say so much per SF or per LF or CY or whatever) so what you paid for the materials or labor is irrelevant in that case, and he would not have a right to see what the materials or labor cost you to produce those work products - just documentation on the actual work performed, like measurement tally sheets or sketches showing quantities installed. In that sort of case with unit pricing, if say a work item called for a unit price for something that cannot be reasonalby measured in the field at this time, say per CY for filling in a low spot on the site and it was not surveyed before and after to determine volume, then you might have to provide subcontractor invoices or trip tickets or pit/quarry loadout tickets to prove the number of yards of fill material delivered, for instance.

An alternative case - if you originally provided an ESTIMATE, rather than a firm lump sum bid or firm priced contract, then he would be entitled to see what the components leading up to the final price are, because an estimate says you get reimbursed, at estimate unit prices or based on the assumptions in your estimate computation (as adjusted to actual amounts or scope of work), at actual reasonable costs and overhead and profit and such as formed the basis of your estimate, which may total more or less than the estimated amount when the job is done and should be adjusted to the "actual" costs (with the respective estimated markups and overheads and such).

Also, for any item causing a contract overrun, then he would have audit rights to proof of the specific quantities or pricing or such that caused the overrun. However, usually that sort of situation should have been covered (partly because it specifically avoids this asfter-the-fact receipt issue) by a contract change order at the time the need became known or evident, with specific agreed-to changes in the firm contract price(s) to accomodate hidden conditions, change of scope, change of materials at customer request or due to unavailability of original materials, etc. This is one of the main reasons change orders should be done as soon as a change condition is detected or requested - so the contract price (as adjusted by the CO) is locked in iron, and avoids the issue of a complete review of all project costs and labor and such at the end of the job to justify a total project cost overrun at that time, where it potentially open up all project costs to inspection.

An example - I consulted once on resolving a mixed unit-priced and lump-sum item contract dispute for a large public infrastructure job which included a lot of different kind of work items - the largest of which was the prime contractor's specialty, but there were a lot of ancillary work items too which they mostly used subs for. They blew away the estimate on the primary work, coming in over $10 million under the bid amounts for those line items. However, a couple of the mechanical systems had problems in owner design and in customs problems in shipping owner-specified equipment that were beyond the contractor's control, so they legitimately filed a roughly $5 million change order request for those overruns. The owner tried to claim that the $5 million overrun should have been offset against the $10 million in underrun on other items, so that they should pay no additional cost, or even get $5 million back. Because the unit prices were distinctly separate and the contract clearly stated the total contract price was the total of the individual line item prices and that renegotiation of one line item price or quantity did not open up renegotiation of other prices for unaffected line items, the contractor won the case - not only the $5 million change order but also more than that amount in a project delay change order to complete that job after the reworked and delayed equipment arrived, plus a punitive award because the owner improperly tried to weasle some of the underrun item benefit away from the contractor.

I would ask your client WHY he wants the receipts - might be thinking warranty, which would be applicable for windows, appliances, roof, siding, etc where there is a manufacturer warranty, and which he should be given what is needed to prove ownership and claim the warranty. And no, it is not legal to require than any future manufacturer (as opposed to contractor) warranty claims go through you unless the MANUFACTURER warranty specifically says it has to go through the installing contractor, as is sometimes the case for warranties requiring an authorized-installer install the equipment.

Otherwise, if you had firm lump sum job or work item pricing in an actual contract (as opposed to an Estimate), then the only reason he could be looking of that info is to try to renegotiate the price after the fact, which is just unfair and not legally supportable.

Here are couple of links to prior similar questions with quite a few responses FYI -

Answered 5 years ago by LCD

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