The construction industry in Texas is complex and often volatile. Contractors, subcontractors, and suppliers are all working together to bring a project to life, but it can be challenging to ensure that everyone gets paid on time and in full. One way to safeguard your rights to payment is through Bond Claims In Texas. This legal action is filed against a surety company to recover payment for work performed or materials supplied on a construction project.
Bond Claims In Texas are governed by Chapter 2253 of the Texas Government Code. This chapter sets forth the requirements for filing a bond claim, the time limits for filing a claim, and the remedies that are available to the claimant.
Understanding Bond Claims
A bond claim is a legal action that is filed against a surety company to recover payment for work that has been performed or materials that have been supplied on a construction project. The surety company is the party that issued the bond, and it is responsible for ensuring that the contractor fulfills its obligations under the contract.
How Does A Bond Claim Differ From Other Payment Protection Methods?
There are two other common methods of payment protection in the construction industry: mechanics’ liens and retainage.
- A mechanics’ lien is a legal claim that is filed against the property that is being improved. The mechanics’ lien allows the claimant to collect payment from the property owner if the contractor does not pay them.
- Retainage is a portion of the contract amount that is withheld by the property owner until the project is completed. The retainage is released to the contractor once the project is complete and all of the contract obligations have been met.
Bond Claims In Texas differ from mechanics’ liens and retainage in a few ways. First, bond claims can be filed against both public and private projects, while mechanics’ liens can only be filed against private projects.
Texas Government Code Chapter 2253 “Public Work Performance And Payment Bonds”
Texas Government Code Chapter 2253 governs the use of performance and payment bonds in public works projects in Texas. This chapter sets forth the requirements for the bonds, the time limits for filing claims, and the remedies that are available to claimants.
The Parties Involved In A Bond Claim Scenario
There are four parties that are typically involved in a bond claim scenario:
- The obligee is the party that benefits from the bond. In the context of construction projects, the obligee is typically the property owner.
- The principal is the party that is obligated to fulfill the terms of the bond. In the context of construction projects, the principal is typically the contractor.
- The surety is the party that issued the bond. The surety is responsible for ensuring that the principal fulfills its obligations under the bond.
- The claimant is the party that is filing the bond claim. The claimant is typically a subcontractor or supplier that has not been paid by the contractor.
Situations That Might Warrant A Bond Claims In Texas Construction Projects
A bond claim may be warranted in any situation where a contractor fails to pay a subcontractor or supplier for work that has been performed or materials that have been supplied. Some common situations that might warrant a bond claim include:
- The contractor goes bankrupt or otherwise becomes insolvent.
- The contractor refuses to pay the subcontractor or supplier.
- The contractor disputes the amount that is owed to the subcontractor or supplier.
- The contractor delays payment to the subcontractor or supplier.
The Process of Filing A Bond Claim
The process of filing a bond claim in Texas is as follows:
- The claimant must first identify the surety company that issued the bond.
- The claimant must then file a written claim with the surety company. The claim must include certain information, such as the name of the project, the name of the contractor, the amount of money that is owed, and the reasons why the claimant is entitled to payment.
- If the surety company denies the claim, the claimant may then file a lawsuit against the surety company.
Challenges And Tips
There are a few challenges that contractors or suppliers might face when filing bond claims. These challenges include:
- The strict timeline for filing a claim.
- The difficulty of obtaining a copy of the payment bond itself.
- The requirement to provide proper notice of the claim.
Here are some tips for overcoming these challenges and ensuring a smooth bond claim process:
- Be sure to file your claim within the required time limit.
- Request a copy of the payment bond from the contractor or the project owner.
- Carefully follow the requirements for providing notice of the claim.
- Consider seeking legal advice if you are unsure about any aspect of the bond claim process.
Bond claims can be a valuable tool for contractors and suppliers to protect their financial interests in the construction industry. By understanding the requirements for filing a bond claim and following the proper procedures, you can increase your chances of success in recovering the money that you are owed.
If you have any questions about bond claims, you should consult with an attorney who specializes in construction law.
About Marshall, Presley, & Pipal, PLLC
Marshall, Presley, & Pipal, PLLC is a law firm that specializes in construction law. We can help you understand your rights and options under the law and protect your interests in construction disputes. Contact us today to schedule a consultation.