Bond Claims in Construction Law
In the construction industry, there are legal mechanisms to ensure that deliverables are met and are met on time. The mechanism of the surety bond is one such means of ensuring that the deliverables of the construction project are fulfilled. In definitional terms, a construction bond is a type of surety bond used by investors in a construction project to protect against disruptions or financial loss as a result of a contractor’s failure to complete a project or failure to meet contract specifications. The bonds ensure that the expenses of the construction project are paid.
A performance bond can be a requirement in both the private and government sectors. The performance bond functions as it sounds. It protects the owner of the project against possible loss in case a contractor fails to perform or is unable to make the deliverables of the project as agreed upon in the contract. In case the contractor becomes insolvent, similarly, a performance bond will compensate the owner of the project for the losses it will incur as a result of the incomplete project. The terms of the performance bond including the payoff amount is stated in the bond documents. The party entitled to the performance bond payment is the owner of the property or structure. A performance bond must specify the work being completed in clear terms. Any descriptions of work that is vaguely constructed may not receive the covering of the performance bond.
In contrast to a performance bond, which is making an owner whole for the non-performance of a contractor, a payment bond is a substitute for a lien. This bond applies when the contractor fails to make payments as agreed in the contractual provisions. The failure to pay as agreed, causes the bond to pay out damages to the parties who were entitled to payment. In effect, the payment bond functions as an insurance mechanism against nonpayment. The payment bond can cover suppliers or even subcontractors who were not paid by contractors.
Making a Bond Claim in Florida
In Florida, making a claim for a payment bond is similar to making a claim for a mechanic’s lien. That is because there are deadlines associated with making notices. The notice process in Florida is very narrow and parties must adhere to them in order to make a successful claim. Fort Lauderdale construction lawyer Brendan Sweeney has years of experience advising clients on payment and performance bonds. Contact us now for a consultation.