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By Bruce Jervis
Project owners, for their own protection, require contractors to furnish payment and performance bonds. Contractors require subcontractors to furnish bonds for the same reason. The bonds incorporate the terms of the construction contract or subcontract by reference. And those contracts authorize alteration through change orders. But what if the surety discovers that the change order process has radically altered the contract it originally agreed to cover? Is the surety discharged of its bond obligations?
In a recent federal appellate case, a prime contractor and its subcontractor settled a delay dispute by negotiating a bilateral change order. New completion deadlines were established for the subcontractor. Liquidated damages for late completion were now imposed on the sub. The prime contractor subsequently terminated the subcontract for default and moved against the sub’s performance bond. The sub’s surety said, in effect, “This is not the subcontract we agreed to bond.” ... Read more.
Featured in this Week’s Construction Claims Advisor:
- Arbitrators Must Decide if Change Order Discharged Surety
- Reprocurement Provided Competitive Advantage
- Bid Nonresponsive Due to Under-Valued Trade Work
By Steve Rizer
While no landmark case in design-build construction emerged this year, there were some important developments in this area worth noting, Capital Project Strategies LLC President Michael Loulakis reported during a webinar that WPL Publishing held earlier this month. During the past year, there have been “several cases that are really significant in that what they’ve done is to establish a sense of where the courts might be going in some very specific doctrines that we have in construction law in general,” he told a target audience of owners, consultants, engineers, architects, subcontractors, and construction law attorneys. ... Read more.