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Monday, July 26, 2004

The Devil's in the details.  A general contractor was unable to collect on a performance bond where the subcontractor defaulted because it had failed to comply with certain terms of the bond.  In Elm Haven Construction Limited Partnership v. Neri Construction LLC, the general contractor failed to provide notice of the subcontractor's default to the bonding company prior to hiring a new subcontractor.  Such notice was required under the terms of the bond.   In failing to give the subcontractor time to cure the default, as provided under the terms of the bond, the general contractor had breached the agreement and was unable to collect under the bond. 

The general contractor also was not able to collect on a payment bond.  The contractor had directly paid certain sub-subcontractors, who had claimed that they were not paid.  The subcontract agreement, however, explicitly prohibited the general contractor from directly paying sub-subcontractors without the permission of the subcontractor and the bonding company.  By making the payments without permission, the general contractor was deemed an "intruder," not entitled to reimbursement.

The decision in the case can be found at the Second Circuit website.  It was decided on June 23, 2004.

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