{"id":896581,"date":"2019-10-14T16:26:19","date_gmt":"2019-10-14T22:26:19","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896581"},"modified":"2019-10-14T16:26:26","modified_gmt":"2019-10-14T22:26:26","slug":"performance-bond-language-critical-determining-suretys-rights","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/performance-bond-language-critical-determining-suretys-rights\/","title":{"rendered":"Language in Performance Bond Critical in Determining Surety\u2019s Rights to Complete"},"content":{"rendered":"\n<p>Jared Gillman | <a href=\"https:\/\/www.saul.com\/blogs\/construction-industry-counselor\/language-performance-bond-critical-determining-surety%E2%80%99s-rights\">Saul Ewing Arnstein &amp; Lehr<\/a> | October 11, 2019<\/p>\n\n\n\n<p>If an owner terminates a contractor due to a contractor default on a bonded project, can the surety hire the same contractor to complete the work under the bond?&nbsp; Depending on the language of the bond, it may be permissible in Florida.<\/p>\n\n\n\n<p>Recently, in&nbsp;<em>Seawatch<\/em>&nbsp;<em>at<\/em>&nbsp;<em>Marathon Condominium Association, Inc. v. The Guarantee Company of North America<\/em>, No. 3D18-1337, 2019 WL 4850194 (Fla. 3d DCA Oct. 2, 2019), a Florida appellate court ruled that the unambiguous terms of an AIA A312 Performance Bond permitted a surety to propose a previously-terminated contractor as the &#8220;replacement contractor&#8221; under a Takeover Agreement.<\/p>\n\n\n\n<p>The AIA A312 Performance Bond provided that the surety was required to exercise one of the following series of options upon a contractor\u2019s default:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>&#8220;4.1 Arrange for the contractor, with consent of the owner, to perform and complete the Contract; or&nbsp;<\/p><p>4.2 Undertake to perform and complete the Contract itself, through its agents or through independent contractors; or&#8230;&#8221;<\/p><\/blockquote>\n\n\n\n<p>The surety elected to complete the contract itself pursuant to Section 4.2 of the Bond, and presented a Takeover Agreement to the owner.&nbsp; The Takeover Agreement provided that the defaulted contractor would complete the project for the surety.&nbsp; The owner refused the Takeover Agreement because it would not consent to the terminated contractor completing the work on the project.<\/p>\n\n\n\n<p>The appellate court held that the terms of Section 4.2 were unambiguous, and lacked the consent requirement of Section 4.1.&nbsp; Therefore, the court would not read into Section 4.2 &nbsp;a consent requirement, and held that the surety\u2019s refusal to provide another replacement contractor was not a breach under the terms of the bond.<\/p>\n\n\n\n<p>The owner also argued that the surety could not complete the project itself under Section 4.2 because it was not a licensed contractor.&nbsp; However, the appellate court rejected this argument, holding that the surety did not need to be a licensed contractor to enter into the Takeover Agreement.<\/p>\n\n\n\n<p>Like any construction contract, it is important to understand the terms contained within a performance bond.&nbsp; Had the owner successfully modified the terms of the bond to require its consent to a replacement contractor, the dispute (and the resulting legal fees) could have been avoided.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jared Gillman | Saul Ewing Arnstein &amp; Lehr | October 11, 2019 If an owner terminates a contractor due to a contractor default on a bonded project, can the surety hire the same contractor to complete the work under the bond?&nbsp; Depending on the language of the bond, it may be permissible in Florida. Recently,&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/performance-bond-language-critical-determining-suretys-rights\/\">Continue reading <span class=\"screen-reader-text\">Language in Performance Bond Critical in Determining Surety\u2019s Rights to Complete<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14],"tags":[9895,12],"class_list":["post-896581","post","type-post","status-publish","format-standard","hentry","category-construction-2","tag-advise-consult","tag-construction","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Language in Performance Bond Critical in Determining Surety\u2019s Rights to Complete - Advise &amp; 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