Our attorneys have experience working with the various types of bonds which one encounters during a construction project. Most common are bid bonds, payment bonds, transfer bonds and performance bonds.
Bid bonds are generally only encountered when a project is being competitively awarded, often on government projects. The purpose of a bid bond is to ensure that a bidder who is awarded the project enters the contract. In some instances, disputes arise when a bidder has made a mistake in their bid, attempts to withdraw the bid, and the government entity looks to the bid bond for recompense.
Payment bonds are prevalent in large private projects and in most public projects. A bid bond is normally secured by the prime contractor, and sometimes large subcontractors, in order to guarantee to the owner that all of the lower tier entities and individuals providing services and materials to a project are paid. It is important for prospective claimants to be careful to comply with the deadlines and notice requirements of the payment bond. Failure to do so may result in an inability to recover under the bond.
Another form of a payment bond is a statutory payment bond pursuant to Fla. Stat. §713.23. This type of bond is recorded on a private project at the time that the notice of commencement is recorded. Upon recordation, the real property on which the project is situated is no longer lienable. Again, it is imperative that special attention is paid so one does not jeopardize their rights to claim under the bond.
A transfer bond secured and recorded in accordance with Fla. Stat. §713.24 also insulates real property from a claim of lien. However, the transfer bond is secured and posted with the clerk of the court after the lien is recorded. Upon posting the bond, the lien is transferred from the real property to the bond.
Along with payment bonds, performance bonds are prevalently seen on large private and public projects. A performance bond is secured by the prime contractor, and in some instances large subcontractors, for the benefit of the entity above it in the contractual chain. By way of example, a prime contractor secures a performance bond for the benefit of the owner. The bond stands as security pursuant to which the entity procuring the bond (the principal) guarantees the performance of its contract to the entity with which it contracted (the obligee).
Some bonds are required to meet certain statutory minimum requirements. Others are not. In either case, it is important to understand what requirements and benefits the bond should afford for those who are required to secure as well as for those requiring the procurement of the bond. Further, for those looking to the bond for protection, it is important to understand and comply with the bond’s requirements. Our construction attorneys focus on all aspects of suretyship law and are available provide highly qualified and experienced legal counsel in these matters.