Legal Question in Business Law in California

Re: what is a good faith dispute

If the item damaged was a $89 table lamp, and the check was for $5,000, no judge would find that a stop-payment was done in good faith. On the other hand, if the job was to put in an oak floor, and you just found out the contractor used pine, that would seem to be a good-faith use of the stop-payment order.

There is no bright-line test to distinguish good faith from bad faith, but if nine out of ten ordinary, disinterested citizens would think what you did was fair and just, so probably would the District Attorney or the judge.

In your particular case, the fact that the damaged item probably wasn't something the contractor was working on or with, but just happened to be there, takes the damage one logical step away from the performance of the services, and this de-linking or reduced nexus kind of suggests you should pay for the job, and negotiate a settlement for the damaged object separately, or at least pay for most of the job with a small hold-back for the damage. You are to some degree protected from loss in the long run by the contractor's insurance and bond.

On the other hand, stopping payment on checks can place you at risk of having to prove that your action was justifiable.