Reading Between the Lines: Notice to your Bonding Company

2013 07 Reading Between the Lines -istock After a masonry subcontractor abandoned his work, the general contractor decided to finish the job itself, while it brought an action against the surety which had issued a performance bond on the subcontractor’s behalf. After all, the masonry company had failed to perform as promised. Though the trial court ruled in favor of the surety, the general contractor appealed and eventually won its case.

NOTICE TO SURETY NECESSARY

The surety’s defense revolved around the general contractor’s lack of prior notice to the surety before it decided to finish what the masonry subcontractor had not. The court agreed that customary language within most surety documents, including the one in this case, allows a surety to disclaim its responsibility if it isn’t formally notified before remedial work is initiated. However, if as here, the surety agreement includes by reference language from the subcontract, language which gives the general contractor the right to take charge and complete any unfinished work, then the surety couldn’t, like its insured, abandon its obligations. On the contrary, it was required to step up and pay up.

Reading Between the Lines: Notice to your Bonding Company was last modified: February 16th, 2016 by Alexander Barthet

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