Florida Court Holds Notice of Default to Surety Not Required Where Subcontract Provision as to Rights on Default Was Incorporated in Bond

Dooley & Mack Constructors, Inc., v. Developers Surety & Indemnity Company
2007 Fla. App. LEXIS 17769 (Fla. Ct. App. Nov. 7, 2007)

Dooley & Mack Constructors, Inc. (“Contractor”), the general contractor on a Miami-Dade Community College project, was the obligee on a performance bond issued by Developers Surety and Indemnity Company (“Surety”), on behalf of Buildtec Construction Group, Inc., the masonry subcontractor (“Subcontractor”). After Subcontractor defaulted by abandoning the job, Contractor completed the masonry work itself and sued the Surety for the resulting damages.

The trial court granted summary judgment for the Surety on the ground that Contractor did not formally notify Surety of the default or provide it an opportunity to cure. Under a typical surety bond, such a failure would result in a discharge of Surety’s obligations. The Court of Appeals of Florida held that that the usual rule did not apply in this matter, however, because the subcontract agreement, which was incorporated by reference in the bond, contained a provision which specifically permitted Contractor to proceed as it did. Article 5(d) of the subcontract, which was expressly made a part of the entire agreement, included the following language:

“…. Contractor has the option, but not the obligation, to notify the Subcontractor that upon its failure to satisfactorily improve the rate of progress after forty-eight (48) hours notice, Contractor shall have the right to declare the Subcontract breached and take charge of and complete the performance of the WORK with such persons, firms, or corporations as Contractor shall deem necessary. In the event the cost to complete Subcontractor’s contract exceeds the original contract price, Subcontractor shall be liable for all such extra costs and damages. The Subcontractor, its surety, and any bond shall be liable to all losses, damages, and expenses, including attorneys’ fees and costs incurred in the prosecution or defense of any action, suit, or arbitration incurred by or resulting to the Contractor on the above account.”

Reading all portions of the documents together, the court held that, Contractor was expressly granted the option to either call upon Surety to perform, or, as it did, to cure Subcontractor’s default itself and thereafter hold the “surety, and [the] bond . . . liable to all losses, damages, and expenses,” without notifying Surety, because Article 5(d) of the subcontract did not impose such a requirement.

Therefore, the court reversed the trial court and directed that summary judgment should be entered for Contractor on liability.

Click here to view full opinion as PDF (provided with the permission of LexisNexis).

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