QUICK NOTE: SUBCONTRACTOR PAYMENT BOND = COMMON LAW PAYMENT BOND

imagesWhat is a common law payment bond?  A common law payment bond is a bond not required or governed by a statute.  For example, if a prime contractor provides the owner a payment bond, that bond will be a statutory payment bond.  On the other hand, if a subcontractor provides the general contractor with a payment bond, that bond will be a common law payment bond.  Why?  Because there is not a statute that specifically governs the requirements of a  subcontractor’s payment bond given to a general contractor.   The subcontractor’s payment bond is aimed at protecting the general contractor (and the general contractor’s payment bond) in the event the subcontractor fails to pay its own subcontractors and suppliers.  The subcontractor’s payment bond will generally identify that claimants, as defined by the bond, are those subcontractors and suppliers the subcontractor has failed to pay.  This common law payment bond is not recorded in the public records so sometimes it can be challenging for a claimant (anyone unpaid working under the subcontractor that furnished the bond) to obtain a copy of the bond. With that said, an unpaid claimant should consider pursuing a copy of this bond in certain situations, particularly if it may not have preserved a claim against the general contractor’s statutory payment bond.

 

Common law payment bonds have a one-year statute of limitations.  This statute of limitations runs from the later of (i) one year from the claimant’s final furnishing date or (ii) one year from the general contractor’s final furnishing date if the general contractor provided a payment bond on the project.  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.