Performance Bonds: Follow the Letter of the Bond and Keep The Surety Informed

Facts key on keyboard

Bonds are not insurance, and a surety is not an “insurer” of the project.

December 6, 2021
Bill Shaughnessy, Jones Walker, LLP - ConsensusDocs

Construction surety bonds are risk management tools utilized by parties on large construction projects. However, bonds are not insurance, and a surety is not an “insurer” of the project. Different from insurance, a surety’s obligation to act typically arises if the principal fails to perform in accordance with the construction contract, and if the claimant satisfies the conditions precedent to enforcing the bond.[1]

This article focuses exclusively on performance bonds on private projects,[2] and highlights practical considerations and surety defenses to enforcement of the performance bond.[3] Spoiler alert – the party making a claim on the bond must strictly adhere to the conditions precedent set forth in the bond throughout the construction project and when calling upon the surety to take action, otherwise the performance bond may be rendered void and unenforceable.

Mr. Shaughnessy may be contacted at bshaughnessy@joneswalker.com



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