Common Law Bonds Versus Statutory Bonds
It is important for contractors, subcontractors, suppliers, and design professionals who provide services or materials on a public project to understand the difference between statutory bonds and common law bonds. Due to the complexity of construction payment and performance bonds and their interpretation, it is always recommended to consult with a competent Clearwater construction attorney.
To determine whether an issued bond is a statutory bond or a common law bond, Florida courts have found, “the primary test in determining whether a bond is a statutory bond or a common law bond depends upon an examination of the obligations imposed upon the principal and surety. The test requires a comparison of the minimum requirements enunciated in the statute and the language contained within the bond.”
Statutory bonds are required by federal, state, city, and municipal governments, or other public authorities for contractors to engage in work that involves the improvement of a publicly owned building. These projects typically require a payment bond and a performance bond, which act as a guarantee, ensuring that the work will be performed as prescribed per the contract and removes liability from the public owner for claims of non-payment against the project.
In the State of Florida, statutory bonds have a statute of limitations of one year from the date of last performance or furnishing materials by the claimant, within which the claimant must bring action in the court of law for non-payment of services or materials provided. However, when the principal on the contract is a general contractor, the one year period is measured from the date of last performance or furnishing of materials by the general contractor.
Common Law Bonds
A common law bond is a bond that either is intended to satisfy the conditions of a statutory bond, but for some reason does not meet the specific requirements outlined, or one that significantly exceeds the minimum statutory coverage requirements. Common law bonds are subject to general laws of contracts and interpreted according to the express terms rather than the statutory requirements.
According to Florida Statutes 95.11 (2)(b), common law bonds have a statute of limitations of five years on performance bonds. The statute states that a “legal or equitable action on a contract, obligation or liability founded on a written instrument, except for an action to enforce a claim against a payment bond” must be brought to court within five years.
To schedule a consultation with one of our Clearwater construction attorneys, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.