Point #1 – Recovery of Profit
A Miller Act payment bond claimant can recover profit against the payment bond since the amount recoverable under the bond includes the agreed contract amount.
For instance, a subcontractor pursued a Miller Act payment bond claim seeking to recover its portion of shared savings per a shared savings contractual provision. The subcontractor’s portion of shared savings was recoverable because the fact that its contract included an incentive (such as shared savings / additional profit) was not improper.
Point #2 – Joint Venturer Cannot Recover
Prime contractors often joint venture with another prime contractor to construct a specific project. A Miller Act payment bond, however, is not intended to benefit a joint venture partner in the event a dispute arises between the partners.
Point #3 – Final Furnishing Means Final Furnishing on Project
Suppliers often furnish materials to subcontractors on an open account based on a credit application the subcontractor executes with the supplier. Sometimes, if dealing with rental equipment, a separate rental agreement is executed each time the subcontractor rents equipment from the supplier. However, the supplier’s notice of non-payment must be furnished 90 days from its last delivery of the equipment on the project (i.e., its final furnishing date). Thus, the supplier doesn’t have to serve a separate notice of non-payment for each piece of equipment.
Point #4 – Credit Application Can Give Rise to Rights
A supplier will have a Miller Act claim if the subcontractor signed a credit application and/or procured materials on credit represented by invoices from the supplier. Even though the supplier may not have a specific contract or purchase order from the subcontractor, that will not preclude the supplier from having a legitimate Miller Act payment bond claim.
Point #5 – Subcontractor’s Bankruptcy Won’t Preclude 3rd Tier Entity’s Claim
A subcontractor’s filing of bankruptcy will not preclude the payment bond rights of a third tier subcontractor or supplier hired by the bankrupt subcontractor.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.