Payment Bond Claims

Construction Litigation

Debt Collection Claims on Government Projects

On a private project, the contractors and subcontractors typically have a right to perfect a mechanic’s lien on the property if they are not paid. This remedy is not available on a government project in Texas if the value of the project is greater than $25,000. As a result, a subcontractor on a government project is typically protected against nonpayment by way of a payment bond.

Notice of Bond Claim

The main prerequisite before the bond company will pay you is a proper notice of claim. A claim by a "subcontractor" MUST meet the requirements of Chapter 2253 of the Texas Government Code. A subcontractor is defined as a person, firm, or corporation that provides public work labor or material to fulfill an obligation to a prime contractor or to a subcontractor for the performance and installation of any of the work required by a public work contract.

The notice of claim must contain certain content and be sent to the proper parties within strict deadlines. You may lose your claim against the bond if you fail to meet ALL of the notice requirements. If you or your company has not been paid for labor and/or materials supplied to a bonded project, we recommend that you contact an attorney with bond claim experience as soon as possible so you don't lose the ability to pursue payment from the bonding company.

Suit On A Bond Claim

If the surety refuses to pay the bond claim, a lawsuit against the surety and the prime contractor must be initiated no sooner than 61 days after the notice of claim and no later than 1 year after the date of mailing the notice of claim. In a suit on a bond claim, a subcontractor is entitled to pre-judgment interest and attorney's fees.

Surety Bonds

A surety bond is a generic term to describe various types of bonds. A surety bond is basically a three party guarantee. The three parties to a surety bond are:

  1. The principal - the party who will be performing a contractual obligation (i.e. the prime contractor);
  2. The obligee - the party who is the recipient of the obligation (usually a government entity);
  3. The surety - the party who ensures/guarantees that the principal's obligations will be performed. Sureties are similar to insurance companies.

Payment Bonds

A payment bond is one type of surety bond. Payment bonds guarantee payment of subcontractors and suppliers in a specific bonded project and are generally issued along with performance bonds.

Performance Bonds

A performance bond is a surety bond issued by an insurance company to guarantee satisfactory completion of a project by a contractor. In essence, the performance bond protects the owner from financial loss should the contractor fail to perform the contract.

Applicable Laws

The Miller Act governs federal projects that exceed $100,000. Generally, the act requires a payment bond and performance bond before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the federal government. For construction contracts that are less than $100,000 (but greater than $25,000), the Miller Act requires certain payment protections in lieu of a payment bond and performance bond.

The Texas Government Code governs public work contracts in Texas. General Contractors who construct government projects in the State of Texas valued at over $25,000.00 are required to procure a payment bond to ensure payment of subcontractors and suppliers.

Contact Us

Perfection of a payment bond claim is a complicated process requiring different notices depending upon the facts of each case and should be performed by an attorney with bond claim experience. Contact one of our bond claim lawyers today.