A
common law construction bond is simply a bond that is not
provided pursuant to a statutory requirement, or one which
was intended to satisfy the conditions of a statutory bond,
but, which either fails to comply sufficiently with the
statutory requirements or which significantly exceeds the
minimum requirements of the statute.
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WHAT ARE THE MOST FREQUENTLY
ENCOUNTERED COMMON LAW BONDS?
The
most frequently encountered common law bonds are:
-
Contractor’s performance bonds on private projects,
- Subcontractor
performance bonds on private and public projects,
- Contractor’s
payment bonds which were intended to satisfy the requirements
of a section 713.23 payment bond but which fail to
comply with the strict statutory requirements in some
material way,
- Contractor’s
payment bonds which were intended to satisfy the requirements
of a section 713.23 payment bond but which significantly
exceed the statutory requirements in some material
way, thereby exceeding the coverage required of a statutory
bond,
- Any
and all subcontractor payment bonds, and
- Bid
bonds.
There has been no definitive appellate court decision in
Florida as to whether a bond intended to satisfy the requirements
of a section 713.245 conditional payment bond, but which
fails to comply with both the requirements of section 713.245
conditional payment bond and the requirements for a section
713.23 payment bond is a common law bond; however, as of
the date of the preparation of these materials, at least
one significant lawsuit involving this issue is pending
at the trial court level in Orange County Circuit Court
and is likely to be appealed on this issue due to the amount
of the claim involved and other factors.
Because all of these bonds are common law bonds, they are
governed by the general law of contracts and are interpreted
in accordance with their express terms and not in accordance
with statutory requirements. Claimants seeking to impose
a claim on common law bonds must, therefore, first be aware
of the existence of the bonds, and then, must obtain a copy
of the bond to determine the nature, scope, and notice requirements,
as well as any other conditions precedent to perfecting
a claim against the bond.
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WHAT
ARE THE NOTICE REQUIREMENTS?
Since common law bonds are governed by the law of contracts
and interpreted according to their terms, a successful bond
claimant must satisfy any reasonable notice requirements
contained in the bond. Additionally, if the intent of the
bond was to comply with the requirements for a statutory
bond, the claimant should comply with any statutory notice
requirements that would be applicable to such a statutory
bond.
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WHAT IS THE DEADLINE FOR
FILING SUIT?
The case law on the issue of the deadline for filing a lawsuit
on a non-statutory, common law payment bond is confusing
at best. Florida Statutes section 95.11(5)(e) provides
that any lawsuit on a public work or private work payment
bond where the principal on the bond is either a contractor
or a subcontractor must be filed within one (1) year from
the date of last performing labor or services or furnishing
materials by the claimant. The statute goes further, and
generates confusion by providing that the one (1) year period
is measured from the date of last performing labor or services
or furnishing materials by the general contractor if the
general contractor is the principal on a bond on the same
construction project. As a result, if the general contractor
furnishes a bond on the project, whether a statutory or
common law bond, the statute of limitations on any claim
against a subcontractor’s common law payment bond
is measured from the date of the general contractor’s
last work, and not the date of last work of the subcontractor
who is the principal on the subject bond. Due to the confusion
generated by the statute, combined with the fact that a
payment bond which the claimant believes to be a common
law payment bond may, in fact, be interpreted by a court
as a statutory payment bond, the prudent practice for a
claimant is to file any lawsuit on a payment bond within
one (1) year from the date of last performing labor or services
or furnishing materials by the claimant.
Lawsuits on common law performance bonds are subject
to the statute of limitations stated in Florida Statutes
section 95.11(2)(b), which provides that a “legal
or equitable action on a contract, obligation or liability
founded on a written instrument” must be brought within
five (5) years.
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ARE
ATTORNEY'S FEES RECOVERABLE?
Pursuant to Florida Statutes section 627.756(1),
an owner, subcontractor, laborer, or materialman can recover
its attorney’s fees in a lawsuit against a surety
under either a payment or performance bond written by a
surety authorized to conduct business in the State of Florida
where the bond is written to indemnify against pecuniary
loss by breach of a construction contract. These provisions
differ from the attorney’s fees provisions under all
forms of statutory payment bonds. Under the provisions applicable
to statutory payment bonds, the “prevailing party”
is entitled to recover its attorney’s fees in such
litigation; therefore, the surety can recover its attorney’s
fees if it prevails. This is not the case under Florida
Statutes section 627.756(1); however, as only the claimant
has the ability to recover attorney’s fees in such
litigation.
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