Five Miscellaneous Miller Act Payment Bond Points

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 dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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