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What Happens When A Party “Calls” A Performance Bond?

ConstructionPlans

Performance bonds are a part of doing business for Florida construction contractors. Whether you are working on a public project where a bond is required by Florida construction law or a private build, you are familiar with how they work. This is why disputes are a development you certainly dread. The whole point of a performance bond is to provide assurance that the project will be completed on time and in accordance with the contract. When a developer has doubts about the contractor meeting these assurances, it may “call” the performance bond by demanding payment from the surety that issued it.

Of course, this basic summary of legal options for Florida performance bonds does not detail the complications that can arise. If you are involved in a dispute, it is wise to retain a Florida bond claims lawyer who can advise you on the laws. You can also benefit from reviewing some background on what happens when a party calls a performance bond.

 Making the Call 

When you are in the position of contractor and secured the performance bond, any claims regarding dissatisfaction will probably come from the property owner or developer. At this stage, the best way to protect your interests is to keep the surety in the loop about any emerging disputes before the other party calls the bond. The surety may even be able to assist with financial or logistical resources, enabling the contractor to avoid a default.

However, it is likely that the owner or developer will move forward with a performance bond claim, i.e., “call” the bond, if a contractor cannot get the project back on track.

 Investigation by the Surety 

When the surety receives a performance bond claim, the company will definitely conduct a probe before simply approving and issuing payment. A surety will only pay a bond claim if:

  • The aggrieved party filed a formal, written claim outlining how the contractor breached the construction contract and is in default;
  • After investigating the circumstances, the surety determines that the contractor defaulted; and,
  • The aggrieved party is in full compliance with its own obligations under the contract. 

Options for Resolving Performance Bond Disputes 

In almost every scenario involving bond claims, none of the parties wants to go to court. Instead, the surety may attempt to work out a resolution by:

  • Extending a loan to the contractor to enable completion of the project;
  • Finding a new contractor to complete the job, pending approval by the owner or developer; or,
  • Taking over the project, which means the surety assumes responsibility for completing all tasks – essentially acting as prime contractor.

Our Florida Bond Claims Attorneys Will Support Your Legal Needs

This information is useful as an overview, but there are many additional legal details to know when a party calls a performance bond. To learn how we can help, please call 561-626-8880 or go online to reach Linkhorst Law Firm, P.A. We can set up a consultation with a Palm Beach County construction lawyer who will provide personalized advice.

Source:

​​leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0255/Sections/0255.05.html

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