Understanding Key Defenses Against A Performance Bond Claim

When faced with a performance bond claim, Merchants Bonding Company doesn't just react; we take strategic action. Our seasoned team leverages tools and expertise to navigate through challenges, mitigate losses, and craft solutions that align with the interests of all parties involved. We endeavor to discover valid defenses held by the principal that can effectively counter a bond claim.

Seven Common Principal Defenses:

1. Unpaid Invoices The principal may have a valid defense if the obligee unjustly withholds payments without legal cause.

2. Notice Obligees may be obligated to provide specific notices, and failure to do so could be a defense for the principal.

3. Plans and Specifications Depending on applicable laws and contracts, providing buildable plans and specifications might be the responsibility of the obligee.

4. Contract Administration Timely responses to required approvals, inspections, and other contractual obligations are crucial for obligees, and failure could serve as a defense for the principal.

5. Impossibility or Impracticability of Performance If unforeseen circumstances beyond the contractor's control make performance impossible, it could be a valid defense.

6. Wrongful Termination Generally, termination by the obligee is acceptable only in cases of inadequate or incomplete performance, leading to a material breach or legal default.

7.  Limitations Obligees must adhere to specified timeframes for filing lawsuits, and failure to do so may provide a defense for the principal.

Documenting Claims and Defenses

It is crucial for the principal to meticulously document all claims and defenses. Merchants Bonding Company conducts a thorough review of each performance bond claim, recognizing that every case is unique. The applicability of the defenses outlined above varies, but rest assured, Merchants takes a proactive approach to ensure a common-sense resolution for all claims.

Explore the nuances of surety bond defenses with Merchants Bonding Company – your partner in strategic risk management.

How do I get a Surety Bond?

Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.

All information provided is subject to change.