Bond Claim Update: A Supplier does not have an Independent Cause of Action against a General Contractor for Failure to Furnish a Copy of the Payment Bond on a Public Project

February 5, 2017

In Bond Restoration, Inc. v. Ready Cable, Inc., a supplier requested a copy of the payment bond from the general contractor on a public project for the City of Houston. The general contractor did not respond to the supplier’s request. The supplier also requested a copy of the payment bond from the City, but the City likewise did not provide a copy of the bond. After the time period to perfect a bond claim expired, the supplier sued the general contractor for the value of materials furnished to the project. The supplier’s claim was based on the general contractor’s failure to furnish a copy of the payment bond pursuant to Section 2253.024 of the Texas Government Code.

 

Under this provision of the statute, a general contractor must, upon written request, provide a copy of its payment bond within 10 days after the request. This statute also provides that a person who fails to provide a copy of the payment bond is liable to the requesting person for that person’s reasonable and necessary costs incurred in obtaining a copy of the payment bond from another source.

 

The Court in Bond found that general contractors do have a statutory duty to furnish the payment bond upon written request, along with some measure of liability due to a breach of this duty. However, the Court held general contractors are only liable for the costs of the supplier’s efforts to get a copy of the payment bond from another source. Importantly, the Court held general contractors are not liable for the amount of the bond claim for the failure to provide a copy of the bond, even if the requesting party fails to perfect its claim as a result of a general contractor’s failure to furnish the bond.

 

Take Away: While there is a statutory requirement for general contractors on public projects to provide subcontractors or suppliers a copy of the payment bond if requested, the failure to do so does not make general contractors liable for the "would have been" bond claim. Instead, under this statute, general contractors may be required to pay reasonable and necessary costs incurred by the requesting party to secure a copy of the bond from another source. 

 

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