Project Defaults

Contractor default on projects can inflict large losses on everyone involved—on contractors, project owners, and sureties alike, though in different ways—and can delay, and ultimately stop, a project. Contractors default for a number of reasons, and not all of them are foreseeable or manageable.  What happens when a contractor defaults largely depends on why the contractor has defaulted and whether the default is actual or not.

Sometimes contractors are improperly defaulted by project owners, and when the surety investigates the claim it finds no fault with the contractor and denies the claim against the surety’s performance bond. On the other hand, if the contractor is found to have been properly defaulted, the surety may implement one of the following standard solutions:

  • Surety takeover of the project
  • Surety hires a completion contractor
  • Surety assistance to the original contractor with completion of the project
  • Tender of the completion of the project to the owner (obligee)

In addition to these options, the surety, contractor, and owner (obligee) may confect other solutions particular and unique to the project and the situation at hand.

The surety attorneys at Shields | Mott have a combined decades experience practicing surety law and have successfully represented sureties on numerous occasions through project defaults and terminations. Our surety attorneys work with surety consultants and professionals to thoroughly examine the legal validity of a default and whether or not the termination was proper. From the triggering of the surety’s duty to conduct an independent investigation of the termination and/or default though an eventual amicable solution and/or litigation the lawyers at Shields | Mott are well versed and prepared to fully defend the surety’s interests. Also, the attorneys at Shields | Mott have written extensively and have presented seminars and webinars on surety law including areas such as project defaults, contract terminations, surety investigations, and claims against performance bonds.

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