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Ocala, FL Construction Bond & Surety Law

Construction Bond/Surety Law & Litigation

Nothing can stall out a construction project quite like contract or payment disputes. When a property owner refuses to pay on a project due to construction defects or other reasons, the project contractor has performed work but has not been paid. Similarly, if a contractor or subcontractor fails to perform a job, the property owner is left with an incomplete construction project. Neither scenario is desirable, and such disputes often trigger construction bond litigation.

To help ensure that construction projects get completed and that the parties involved are protected from potential losses due to unforeseeable circumstances, construction surety bonds can be utilized to curb risk. Construction surety bonds are governed by Fla. Stat. 337.18.

Payment surety bonds under Fla. Stat. 713.23 ensure that contractors and subcontractors get paid for their work and performance surety bonds ensure that construction will be completed by either paying for replacement contractors or correcting defects in the construction project. Florida surety & construction law can be complicated, and when a dispute arises between the parties, resolution often requires the assistance of a construction bond litigation attorney.

How Construction Surety Bonds Work

A principal (i.e., the party who agrees to do something – for example, the owner who promises to pay when construction is complete or the contractor who promises to complete a construction project) can obtain a surety bond, which is effectively a line of credit extended by the surety in exchange for an indemnity agreement from the principal. When a principal does not make good on their part of a construction contract, an obligee (i.e., the person who benefits from the surety bond or is protected by the surety bond) can seek remedy from the surety by initiating construction surety bond claims. Once the obligee is remedied, the surety in turn will seek reimbursement for the surety bond from the principal.

Reimbursement from the principal usually has to be facilitated through litigation as the principal often disputes reimbursement and files counterclaims against the surety, while the surety demands indemnification. Surety bond litigation can be complex, but a skilled construction surety bond litigation attorney will know how best to handle the dispute.

A Surety Bond Is Not The Same As Insurance

A surety bond is not insurance. With a surety bond, there are three parties involved — the principal, the surety, and the obligee — and the risk associated with failing to adhere to the terms of a construction contract rest with the principle. To say this another way, the surety is indemnified by the principle. On the other hand, under an insurance policy, which only involves two parties — the insurer and the insured — the risk transfers to an insurance company. In other words, the insurance company indemnifies the insured.  

How Can A Construction Law Attorney Help?

Having an experienced construction law attorney review any construction contracts and surety contracts prior to signing can go a long way towards avoiding legal issues and potential pitfalls in a construction project. The construction law attorneys at McGraw, Rauba & Mutarelli can assist you in securing a surety bond and construction litigation matters, and can provide you with surety litigation and counsel.

(352) 789-6520