Common Law Bonds

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:

  1. Contractor’s performance bonds on private projects,
  2. Subcontractor performance bonds on private and public projects,
  3. 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,
  4. 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,
  5. Any and all subcontractor payment bonds, and
  6. 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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DISCLAIMER AND CAUTION: THESE MATERIALS ARE PROVIDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE NOT INTENDED NOR SHOULD THEY BE CONSTRUED AS LEGAL ADVICE AS TO ANY PARTICULAR SET OF FACTS OR CIRCUMSTANCES. DUE TO THE COMPLEXITY OF THE CONSTRUCTION PAYMENT BOND STATUTES AND THE CASES INTERPRETING AND APPLYING THE STATUTES, IT IS RECOMMENDED THAT COMPETENT LEGAL COUNSEL BE CONSULTED IN REGARD TO ANY QUESTIONS AS TO THE APPLICABILITY OF CONSTRUCTION PAYMENT BOND LAW TO ANY SET OF PARTICULAR FACTS.

 

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