EdLawConnect Blog

In a recent decision, Pittsburg Unified School District v. S.J. Amoroso Construction Co., Inc. (December 22, 2014), the California Court of Appeal affirmed that public agencies have the right to unilaterally declare a default under a construction contract and demand a distribution of securities retained by escrow.  The Court based its decision on Public Contract Code section 22300, which provides that once a public agency sends a proper notice of default, it has the right to withdraw securities held in an escrow retention account “immediately upon its own determination” if it determines that a contractor has defaulted on the construction agreement. The key issue confirmed by the Court is that a public agency may unilaterally determine that a contractor defaulted on its obligations under a construction agreement without judicial determination, and thus, may unilaterally withdraw retention proceeds from an escrow account.