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Making a Claim Under a Labour & Material Bond
A typical labour and material payment bond is issued for the protection of the sub-trades and suppliers of the principal named in the bond. Some bond forms, including federal forms, extend to provide limited protection to other claimants who are not necessarily directly contracted to the principal.
A contract is a contract
The bond is based upon the contract and is governed by its terms. Therefore, a bond will not pay you money that you would not be due under the terms of your contract. For example the sub-contract provides that you will be paid only upon payment by the owner to the principal, then that condition would continue to apply even if the claim were submitted under a bond. The surety would not make payment until such time as the owner made payment for the work for which you are claiming.
Protect your rights
Obtain a copy of the bond form and understand its terms. Comply with notice periods by making sure your claim is filed within 120 days of the last day materials and/or services were supplied. Occasionally a defaulted contractor will owe money to a claimant on more than one job. Claims can only be made for work and/or goods supplied to the bonded job. A claimant must have a direct contract with the defaulted contractor.
Also the bond contains a suit limitation which typically expires one (1) year from the date on which the principal ceased work under the contract, including work performed under any guarantees or warranties.
Be prepared to document your claim
A claimant must provide proper documentation to prove that monies are in fact due under the contract covered by the payment bond.
The following is typical information/documentation that must be submitted to the surety when making a claim under the labour and material payment bond. As each claim is different, other and/or additional documentation may be required, depending upon the circumstances:
- A complete copy of the contract with the principal in connection with the project.
- Copies of all change orders issued with respect to the contract.
- Copies of all invoices and/or progress billings submitted to the principal.
- Copies of all statements of accounts rendered to the principal.
- A summary of all payments made including the date and amount of each payment.
- Evidence and documentation supporting other amounts claimed which have not been agreed to or authorized in writing under the contract or within a change order.
- A statutory declaration regarding payments to your own subcontractors and suppliers.
- Evidence of the last date upon which labour and/or materials were supplied to the project (e.g. delivery slips, timesheets).
- A copy of the claim for lien if any has been filed.
- A current Worker’s Compensation Board clearance letter.
- Any other documents which you believe help to establish the validity and quantum of your claim.
This information is intended to serve as a general guideline to assist members and other readers in responding to the issues discussed. Nothing contained herein should be construed as legal advice and readers are cautioned to consult with legal counsel for such advice.