January 2012

Get a copy of the bond!

By Etienne L. Morin Lawyer

A. Électrique inc., owned and operated by electrical contractor André, has just been awarded the largest contract in its history from general contractor Miserly Construction.

Upon signing the contract, Miserly insisted on including a clause by which André waived his right to file a legal construction hypothec in exchange for a bond guaranteeing the material and labour provided by A. Électrique inc. Thrilled with the new contract, André neglected to obtain a copy of the bond when signing the contract.

The work got underway, and André waited to get paid. Thinking that the bond guaranteed Miserly's obligations, André finished the project without ever receiving a single cent.

André contacted Miserly several times regarding payment. Miserly claimed that the amounts to be paid out by the owner for André's work were still pending but that there was nothing to worry about since Miserly's bonding company would cover the invoices if cash assets were lacking.

In the meantime, work by the other subcontractors on the property continued.

Four months later, André still had not been paid. He contacted his attorneys, who asked for a copy of the bond in the contract. André did not have a copy of the document and requested one from Miserly and the professionals on the job site.

André eventually received a copy of the bond from the jobsite engineers. The bond stipulated that André was to file a requisition for payment from Miserly and the bonding company in the 120 days following the completion of the work.

André therefore filed a requisition delivered by bailiff to Miserly and the bonding company, Gotbilked. The request was denied by the bonding company, which claimed that André had not respected the provision by which the requisition was to be sent to Miserly and Gotbilked in the 120 days following the completion of the work.

In the interval, Miserly made an assignment for the benefit of creditors, and a trustee was appointed.

André's only recourse was to file a proof of claim with the trustees. He will certainly not be paid in full but will have learned that a bond is only beneficial when the recipient meets all of its conditions.