07/19/2010
After an approximately one-year process, the more than twenty-five year old AIA bond forms have been revised. The new editions are Bid Bond Form A310-2010, Performance Bond Form A312-2010, and Payment Bond Form A312-2010. The AIA will make the prior editions available also until late 2011 or early 2012 when it will phase out sales of those prior editions.
Many of the revisions are minor edits or are for the purpose of re-organizing provisions into different sections, providing clarification of certain provisions, or providing definitions of certain terms. One intent was to streamline the procedures for making claims under the bonds. Another may have been to make the bonds more "user-friendly" and favorable to owners of construction projects.
The bid bond provides that, if the contractor refuses to honor its bid and enter into an awarded contract, the surety will pay the owner (subject to the bond amount) the difference between the contractor's bid amount and the larger amount incurred by the owner in contracting with another contractor. Some public project owners require that a bid bond meet certain statutory requirements. Language has been included in A310-2010 stating in effect that statutory requirements will take precedence over the printed bond provisions and be incorporated into the bond. Further, for all projects, language has been included to allow the owner and the contractor to agree to an extension of the acceptance date of the bid without notice to the surety, for up to sixty (60) days.
The Performance Bond Form A312-2010 modifies certain notice requirements and either deletes or shortens certain waiting periods. In the prior edition of the performance bond form, the surety's obligations were limited to the amount of the bond. However, under the terms of A312-2010, if the surety proposes to take over and complete an unfinished project, the surety's liability is not necessarily limited to the amount of the bond.
One of the main intents of a payment bond is to protect the owner from mechanics' liens. Therefore, in Payment Bond Form A312-2010, the definition of "Claimant" has been expanded to include all rightful lien claimants, including subcontractors below the third tier. Further, language has been included to make it clear that, upon the owner's notice and tender of defense, the surety is obligated to defend, indemnify and hold harmless the owner against a duly tendered claim, demand, lien or suit.
As with other AIA form construction documents, it has been said that the new bond forms "preserve fairness and balance among the parties to the documents." That may be open to debate, depending upon which party you happen to be or to represent. No form is perfect or "one size fits all." A different form or revisions to the AIA form may very well be appropriate for any particular construction project. For more information, contact Steve Hamilton or any other member of our Construction Law Practice Group.