Bond Claims & Surety Law
The area of construction bond law is rife with technicalities and traps for the unwary. There are many deadlines, forms and notices that must be understood by the Florida construction lawyer and, to some degree, the project representatives. When an issue arises concerning a bond claim or surety law, contact Warner, Sechrest & Butts, P.A. We can understand your business and find the best approach to resolve the differences and disputes that cause work stoppages.
Performance & Payment Bonds
Florida has a public bond law found in Florida Statute 255.05 that requires bonding for most public projects. This tracks the Federal Miller Act and is known as the Little Miller Act. The law requires both payment and performance bonds.
- Performance bonds protect the owner from contractor abandonment or defective construction in the event that the contractor is unable or unwilling to perform. A performance bond is sometimes used to guarantee payment for labor, materials or services supplied during a construction project. In those instances, it’s used in place of a construction lien.
- Payment bonds protect the subcontractors and suppliers from nonpayment by the contractor. On private projects, a payment bond protects the owner's property from liens.
Public property is not subject to liens. One nuance of the bond laws in Florida is the conditional payment bond. This type of bond allows a contractor to file a lien against the property due to a lack of payment from the owner. Florida's bond laws pertaining to private jobs are found in Chapter 713 and do not simply mirror the public bond laws. Thus, only a construction law expert should be involved in bond right analysis and claims.
General Indemnity Agreement
Another complex area of surety law involves the general indemnity agreement (GIA). This document governs the relationship between the bonding company and the bond principal. The nature of their relationship is not an insurance relationship, as the surety has the right to reimbursement from the principal for any payouts or losses suffered as a result of bond claims. The surety has broad and powerful weapons under most GIAs, and the principal is not in a good position to bargain once the bond claims are made.
Often, this results in a bankruptcy if the projects have reached a high level of loss. The bond principal must understand the nature of this relationship and be very cautious to avoid claims against the bond. A strong subcontract is vital to protect the bonded contractor.
Resolving Payment & Performance Bond Disputes
Most disputes over a payment or performance bond develop from a default or breach of contract. The construction attorneys in Gainesville with Warner, Sechrest & Butts, P.A. have helped clients resolve disputes stemming from these issues, such as:
- Fraud, whether related to the performance bond agreement or project contract;
- Illegal activity connected to the construction project;
- Nonperformance of duties; and
- Assigning contractual duties without proper authorization.
Often a resolution can be found by communicating with the surety, contractors and project owner. However, if a claim is validated, there are two options for resolution: tender or takeover.
When a contractor clearly is unable to complete the project and therefore breaches the contract, the tender option is applied. The original contractor is then responsible for finding a new contractor to finish the project and deals with the new contractor directly. The only remaining obligation of the original contractor is to the surety.
The surety accepts responsibility for the project’s completion and often hires a contractor who specializes in completing a construction project in this specific situation.
The goal of a construction lawyer is to find a swift and satisfactory resolution to all construction disputes for our clients. Warner, Sechrest & Butts, P.A. has represented all manner of clients in the construction industry, often resolving disputes without a trial.
Gainesville Construction Law Attorneys
If you need a lawyer who understands bonds and surety law for counsel, contract review or dispute resolution, call the construction law department at Warner, Sechrest & Butts, P.A. Several of our construction lawyers are board-certified and have years of experience litigating both sides of bond disputes, helping us stand out among Gainesville construction law firms. We frequently review construction bonds prior to a project’s beginning and advise clients on the legal and financial liability of the project’s bonds. Contact Warner, Sechrest & Butts, P.A. today.