Why Palm Beach Lawyers Say Performance Bonds Don’t Guarantee Protection?

Although it’s prudent to get a performance bond from your general contractor as a protective measure against defective work, Palm Beach lawyers say that it doesn’t really guarantee protection since the performance bond only lasts up to a certain point in time. Any lawyer in Palm Beach will tell you that the right to make a claim is forfeited if you fail to file a lawsuit against the surety of the performance bond within its validity. While the owner’s deadline for filing a lawsuit against the general contractor can be easily determined, the calculation for the general contractor’s deadline to file a lawsuit against the sureties of a subcontractor’s performance bond can get quite complicated.

According to Palm Beach lawyers, an individual is only given a period of five years from the exact date the work at issue was finished and accepted to file a lawsuit against a performance bond. Failure to do so will result into the lawsuit being forever time-barred. Generally, for lawsuits based on a latent construction defect (a defect that is not immediately observable), the time period for filing only starts to run once the defect is discovered.   This general rule, however, is inapplicable to claims against a surety of a performance bond. Thus, the discovery of a latent defect after five years and a day after the work is finished and accepted will not hold the surety of the performance bond accountable.

To determine the deadline for filing a lawsuit against the performance bond surety of a general contractor, a lawyer in Palm Beach will look at the owner’s acceptance of the work at issue as the start of the 5-year period. In contrast, a claim made by a general contractor against the performance bond of a subcontractor must comply with the work of the subcontractor and the subcontract. Therefore, the general contractor’s five-year period begins once he or she accepts the work of the subcontractor and pays for it in full, in accordance to the terms of the subcontract.

Palm Beach lawyers say that the expansion of the subcontractor’s scope of work due to change orders, disputes that arise between the general contractor and the owner due to the quality of the work done by the subcontractor, and the utilization of completion or replacement subcontractors can make the acceptance of the subcontractor’s work at issue ambiguous. The reason is that the representations of the general contractor in its payment applications to the owner as to the subcontractor’s work status, the payments made by the general contractor to the subcontractor and certifications from various inspectors and the architect of record can validate arguments disputing the start of the five-year period. The resolution of this matter determines whether a potential claimant can have the surety of the performance bond pay to fix the defects or not.

To sum up, a lawyer in Palm Beach will always advise a claimant to be vigilant in preserving the protection afforded by a performance bond because the requirements to make a claim against a performance bond surety are extremely time-sensitive. To ensure protection when needed, one must adhere to the notice and the claims procedures stipulated in the bond and file a lawsuit against the surety of the performance bond before the 5-year period after the work at issue was finished and accepted expires. To avoid disputes regarding the timeliness of the lawsuit, the earliest arguable date for the completion and acceptance of the work at issue must be used by the claimant in calculating the deadline for the filing of the lawsuit.

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