By Bill Blancato, special to North Carolina Construction News. There is an old adage: “Never say never.” This is usually good advice, but when. Although there are several changes to the bond form that can be reviewed on the AIA’s website (Click Here for A Comparison Document), one modification. This document was electronically produced with permission of the AIA and Electronic Format A 1. AIA Document A – Electronic Format.
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A contractor may also demand performance and payment bonds from its subcontractors. The following article discusses the procedure for making claims on these standardized bonds on private projects and many public works projects. But it is important to be aware that federal, state, and municipal statutes may modify the procedural requirements for a bond claim. When this Bond has been furnished to comply with a statutory or other legal requirement in the location of the Project, a provision in this Bond conflicting with said statutory aiia legal requirement shall be deemed deleted here from and provision conforming to such statutory or other legal requirement shall be deemed incorporated herein.
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When so furnished, the intent is that this Bond shall be constructed as a statutory bond and not as a common law bond. By issuing a performance bond, a surety guarantees that work a contractor has agreed to perform will be delivered to the project owner. The procedures for an owner to declare default on a performance bond differ across these standard forms. The AIA provides aai distinct performance bond forms: AIA A and eds. A is the most widely-used traditional performance bond in private construction.
A contains several procedural steps that the owner must follow to make a valid claim on the bond. First, the owner must notify the contractor and surety that it is considering declaring the contractor in default.
The second condition aiaa differs between A and its predecessor, A Under A, the owner must, within 15 days, request and attempt to arrange a meeting with the contractor and surety to see if an agreement zia be reached on future performance.
If using A, the owner need not request a meeting if it provides notice of potential default to the contractor and surety. But A does allow the surety itself to request such a meeting.
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It is important to note that A incorporates the underlying contract by reference, which may contain additional requirements for declaring default and terminating the contractor. The owner must then agree to pay the balance of the contract a32 to the surety, or to another contractor selected by the surety. Lastly, the AIA form requires that the owner not be in default itself on the contract and follow the contract termination procedures, including any opportunities to correct the cited deficiencies as mandated by the contract and the applicable law.
The case Stonington Water Street Assoc. In Stoningtonthe owner complied with the notice and pre-default meeting procedures, but it failed to correctly declare the contractor in default when reasons arose, failed to formally terminate the contractor in accordance with the incorporated terms of the construction contract, and improperly selected its own replacement contractor without consulting the surety. Accordingly, the court held the owner was barred from bringing its claim on the bond.
The AIA A performance bond is the predecessor to A and is still used on construction projects. The default procedures under A are simpler than those of A Another important difference between A and A is that A does not require the owner to agree to pay the balance of the contract price to the surety. InConsensusDocs published a new standard form performance bond, ConsensusDocs This form contains similar provisions to the AIA A, but with more modern language.
The conditions to make a claim under ConsensusDocs require the owner to: The owner also must not be in default under the contract. When it issues a payment bond, a surety agrees to cover the risk that a contractor will fail to pay its subcontractors, laborers, or suppliers with proper claims for unpaid labor and material.
These standard form payment aoa also contain different procedural requirements for pursuing a claim. The payment bond form used most frequently on private projects, as well as on many state and local public works, is AIA A With regard to notice, ConsensusDocs distinguishes between first-tier subcontractors and suppliers those with a direct contract with the contractor and lower-tier claimants those without such privity.
For those claimants with privity, the payment bond does not require any notice be given to the surety or contractor. A claimant with privity may bring a3122 claim to the surety if the claimant has not been paid in full within 90 days after it provided or performed the last of the work or labor.
Similarly, a claimant lacking privity may also bring a claim on the bond after the same day period—as long as it has also provided the notice outlined above. Parties intending to use a standard form payment bond should note the procedural differences for making a claim between the AIA and ConsensusDocs forms.
While AIA A requires notice to the contractor and surety before filing a lien, ConsensusDocs does not require claimants in privity with the contractor to provide notice of their claims before the applicable day aiia expires. The procedures for making a claim under standard form bonds differ by the type of bond and x312 promulgating association.
The process for determining the procedural requirements of a specific bond should involve a detailed examination of the bond, with focus on the obligations imposed on the parties, as well as a comparison of the aiaa language against the minimum requirements in applicable federal, state, or municipal statutes. Search Common Sense Contract Law.
Mayo vCard Associate Atlanta, Georgia.