Okay, thanks. From your answer, I assume you're supporting the owner's position in the transaction. That said, you asked:
What can the GC do? What are his rights? Can he stop the project in any way? Can he get in the way of final inspections?
A: Under irrefutable principles of contract law, where a party to a contract fails to perform, the other party is released from any further obligation to perform the remainder of the contract. Thus, the owner, in your scenario, having suffered a breach of contract from the original GC, no longer has any obligation to perform under the contract. Which means that the owner is free to hire someone else to complete the project.
The original GC can sue for "substantial performance," and assuming that some benefit to the owner can be proved in court, then the owner would be liable for that portion of the contract that was performed prior to the GC's breach. If the GC's breach was such that no benefit was ever provided to the owner, then the owner would be found not liable for anything under the original contract.
The GC can record a lien against the owner's property. But, if the GC tries to foreclose the lien, then once again, the GC must prove the benefit to the owner, in order to obtain a judgment against the owner. Otherwise, the GC loses.
If the GC records a lien but doesn't sue to foreclose within 90 days, then the lien expires, and that's the end of the GC's lien (though the GC could sue the owner without a lien -- it's just a lot harder to collect).
The owner could also complain to the CSLB that the GC failed to perform and this cost the owner money. If proved, the CSLB may revoke or suspend the GC's license. The owner could also sue the GC's bonding company for damages, up to the value of the bond (usually $12,500), if the GC has caused actual out-of-pocket damages to the owner.
I think that about covers the issue.
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