{"id":904475,"date":"2025-06-19T11:40:07","date_gmt":"2025-06-19T17:40:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904475"},"modified":"2025-06-19T11:40:10","modified_gmt":"2025-06-19T17:40:10","slug":"performance-bonds-not-all-created-equal","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/performance-bonds-not-all-created-equal\/","title":{"rendered":"Not All Construction Performance Bonds Are Created Equally"},"content":{"rendered":"\n

John Mark Goodman | BuildSmart<\/a><\/p>\n\n\n\n

The Oklahoma Supreme Court has rejected a contractor\u2019s performance bond<\/a> claim due to the lack of adequate notice to the subcontractor\u2019s surety (see\u00a0Flintco LLC v. Total Installation Management Specialists, Inc.<\/em>, No. 120,100 (Okla. May 28, 2025)).\u00a0The case involves the construction of three student housing buildings on the campus of Oklahoma State in Stillwater.\u00a0During construction the flooring subcontractor fell behind schedule.\u00a0The general contractor communicated its concerns to the subcontractor but not to the subcontractor\u2019s surety.\u00a0The general contractor ultimately decided to supplement the flooring subcontractor\u2019s work but did so without first giving notice of the subcontractor\u2019s default to the subcontractor\u2019s surety.\u00a0Five weeks after supplementing the subcontractor\u2019s work, the general contractor gave notice to the subcontractor\u2019s surety that it was making a claim on the subcontractor\u2019s performance bond for costs incurred supplementing the subcontractor\u2019s work.\u00a0The trial court ruled in favor of the general contractor, but the Oklahoma Court of Civil Appeals reversed, concluding that the bond required the contractor to provide prior notice of default to the surety as a mandatory condition precedent to recovery of supplementation costs.\u00a0The Oklahoma Supreme Court agreed with that conclusion.<\/p>\n\n\n\n

In reaching that decision, the Supreme Court helpfully clarified the different types of performance bonds, which are not all created equally:<\/p>\n\n\n\n

\n

In the construction industry, various types of bonds are commonly included under the heading of \u201cperformance bond\u201d including: 1) the traditional performance bond; 2) the indemnity bond; 3) the completion bond; and 4) the manuscript bond. Each of these bonds has as its objective the protection of the obligee against contractor default. Under an indemnity bond, the surety\u2019s performance obligation is limited to reimbursing the obligee for the costs of completion of the project, but generally does not expressly give the surety the right to cure a default by takeover and completion. Under a completion bond, the surety\u2019s performance obligation is generally limited to the single option of taking over the work and completing the contract at the sole expense of the surety. The manuscript bond combines performance, completion, and indemnity obligations, and is often tailored and negotiated in projects where large owners are intent on shifting to the surety and contractor as much risk as possible.<\/p>\n\n\n\n

The Bond involved in the present case is a traditional performance bond, modeled after a standardized contract form developed and published by the American Institute of Architects (AIA) \u2014 the A311 Performance Bond. This type of bond form provides several performance options to the surety, including remedying the default or arranging for performance. These options contemplate that the surety has a variety of choices, such as assisting the principal contractor with labor or materials or engaging a replacement contractor to complete the work. The Bond also permits the obligee, after reasonable notice to the surety<\/em>, to arrange for performance of the work, in which case the surety is required to provide financial compensation for the cost of completing the project.<\/p>\n<\/blockquote>\n\n\n\n

The Flintco<\/em> court recognized a split of authority among courts interpreting similar performance bonds based on the AIA A-311 form. While some courts have concluded that prior notice to the surety is indeed a condition precedent to recovery, others have disagreed. Applying traditional rules of contract interpretation, the Flintco<\/em> court ruled that the performance bond at issue did require prior notice to the surety as a condition precedent to recovery of supplementation costs. Having failed to give prior notice to the surety, the contractor\u2019s performance bond claim was rejected. <\/p>\n\n\n\n

A copy of the court\u2019s decision is available\u00a0here<\/a>.\u00a0It is a good reminder to pay close attention to the wording of your bonds, which are not all created equally but can have differing notice requirements and provide different forms of relief.<\/p>\n\n\n\n

\n\n\n\n

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n\n\n\n

Republished with permission. The article, \u201cNot All Construction Performance Bonds Are Created Equally\u201d was originally published on BuildSmart by Bradley Arant Boult Cummings LLP. Copyright 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"

John Mark Goodman | BuildSmart The Oklahoma Supreme Court has rejected a contractor\u2019s performance bond claim due to the lack of adequate notice to the subcontractor\u2019s surety (see\u00a0Flintco LLC v. Total Installation Management Specialists, Inc., No. 120,100 (Okla. May 28, 2025)).\u00a0The case involves the construction of three student housing buildings on the campus of Oklahoma… Continue reading Not All Construction Performance Bonds Are Created Equally<\/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":[9],"tags":[9895,224,9894],"class_list":["post-904475","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-performance-bond","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nNot All Construction Performance Bonds Are Created Equally - 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