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Contract Providing for Payment Bond Applied to Temporary Skilled Labor



By Patricia Porter Kryder

The manager for the company providing the skilled temporary labor sent three emails to the assistant project manager employed by the principal subcontractor with the bond giving written notice that they were providing labor. Each of the emails specified in detail the nature of the temporary skilled labor being provided and the additional services on the project.

In addition, the manager communicated with the principal subcontractor’s agents and employees on a regular basis during the construction. The manager was allowed to use the principal subcontractor’s jobsite trailer to conduct routine office work, and he was provided a corporate email address.

The principal subcontractor paid the subcontractor the full amount for the installation of ductwork. However, the subcontractor did not pay the company providing the temporary skilled labor for the installation of ductwork. The managers of the temporary skilled labor company contacted the project manager and assistant project manager for the principal subcontractor and notified them the subcontractor was in default due to lack of performance.

The company providing the skilled temporary labor bought a claim against the subcontractor for the installation of ductwork alleging breach of contract and obtained a default judgment. In addition, the company filed a claim to collect on the payment bond that the principal subcontractor had obtained.

The issue before the Supreme Court of South Carolina was whether or not the payment bond covered this claim. The surety argued the company failed to provide adequate notice of its work on the project under the South Carolina statute governing payment bonds.

The court found that the notice provisions did not apply to the payment bond. The court distinguished between statutory bonds and common-law bonds and stated the latter are either “(1) any bond not required by statute… or (2) any bond required by statute but that specifically varies the statutory requirements so as to provide broader protections test.”  The court held the principal subcontractor’s bond with the surety was a common-law bond and did not include any notice requirements found in the bond statute. The court noted the parties were free to contract for broader or less stringent notice requirements. The court reversed the lower court’s decision in favor of the surety.


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