L & A Contracting Company v. Southern Concrete Services, Inc.
17 F.3d 106 | Court of Appeals for the Fifth Circuit | 1994
What This Case Means for Subcontractors
L & A Contracting sued Southern Concrete Services and its surety (performance bond company) for failing to deliver concrete on a bridge project. The court found Southern Concrete liable for breach but ruled the surety was not liable because L & A never formally declared Southern in default using clear, direct language. The surety only becomes responsible when the contractor explicitly terminates the contract and declares material breach—complaints about poor performance alone don't trigger surety liability.
Key Takeaways
- •If you're a subcontractor with a performance bond, your surety won't be liable unless the contractor formally declares you in default using explicit, unambiguous language. Vague complaints don't count.
- •If you're a general contractor, you must formally declare a bonded subcontractor in default with clear, direct language to hold the surety responsible. Document this declaration carefully.
- •There's a legal difference between 'breach' (failing to perform) and 'default' (formal termination). Only default triggers surety liability, so know your contract's default procedures.
Declaration of default must be made in clear, direct, and unequivocal language.
Frequently Asked Question
What do I need to do to make a bonded subcontractor's surety pay for poor performance?
You must formally declare the subcontractor in default using clear, direct, and unequivocal language that explicitly states the material breach and contract termination. Simply complaining about performance problems is not enough. The surety won't be liable unless you follow proper default procedures outlined in your contract.
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