"Complete this… project"

When a contractor defaults on a bonded project, the surety’s rights are determined principally by the terms of the performance bond issued by the surety. In a recent decision in Florida, Seawatch at Marathon Condo. Ass'n v. Guarantee Co., 44 Fla. L. Weekly 2451 (Dist. Ct. App. 2019), the court – interpreting the performance bond – allowed the surety to complete the project using the original defaulted contractor, over the objection of the owner.

The performance bond form – the nearly ubiquitous standard AIA A312 form – provides in part that the surety, with the “consent” of the project owner/obligee, may arrange to have the original defaulted contractor finish the project. Here, the owner objected to the reappearance of the contractor on the job, but the surety – utilizing another clause within the bond which allowed the surety to “Undertake to perform and complete the Contract itself, through its agents or through independent contractors” – insisted that the original contractor could perform the completion work by working under the surety which was technically acting as completion contractor. The Florida court agreed. (The surety also defeated arguments of the owner that the surety as “completion contractor” was required itself to maintain a general contractor’s license.)

It should be noted that the numbering of the paragraphs from the bond as quoted in the court decision reflects that the 1984 version of the A312 performance bond – and not the current 2010 version – was being used on the construction project, despite the fact that the job commenced in 2014. The operative surety completion language is identical in both versions, however.

A copy of the court’s decision can be found here: https://cases.justia.com/florida/third-district-court-of-appeal/2019-3d18-1337.pdf?ts=1570028951