The surety bond is an agreement among parties to a construction project. It minimizes the risk of non-payment for subcontractors and suppliers, while guaranteeing performance of the contract terms.

Three main parties form the surety guarantee:

  1. Principal – this is the party required to post a bond.
  2. Obligee – usually a governmental entity or private party/company that requires the “bonded” principal.
  3. Surety – provides a financial guarantee on behalf of the principal that bonded obligations will be met.

The surety guarantees that funding and personnel will be available to complete the project and that all payments are made to subcontractors, suppliers and others.

Louisiana Surety Bonds: Public v. Private Construction Projects

Public projects in Louisiana paid for by public funds fall under the rules of The Public Works Act (La. R.S. 38:2241). For any contract in excess of $25,000 the contractor must provide a bond with surety for no less than 50% of the contract price. This must be executed by the contractor and surety, approved by the public entity and recorded in the office of the recorder of mortgages in the parish where the work will be done no later than 30-days after work has started.

Private projects do not require a bond, but owners receive certain legal protections under the Private Works Act (La. R.S. 9:4802). Bonds must be attached to the notice of contract and filed prior to the start of any work on the project. The amount of surety required under the Louisiana Private Works Act depends on the contract price:

  • $10,000 or under – the bond must be for the entire contract price.
  • $10,000 to $100,000 – the bond must be for 50% of the contract price.
  • $100,000 to $1 million – the bond must be for 33.3% of the contract price and not less than $50,000.
  • $1 million and up – the bond must be for 25% of the contract price and not less than $333,333.

The surety guarantees to the owner and other claimants against the contractor that all amounts for claims on the private project will be paid. It also serves to guarantee complete and timely performance of the contract unless expressly excluded by terms in the contract.

Recovery of public and private project bonds may require prompt action, and claims are limited by strict statutes of limitations. Once a dispute arises, a claimant may be required to send specific notices to the project owner and bonding company. The type of notices will depend upon state law, the type of project, and the type of claim.

The Smiley Law Group has assisted many clients with their claims against sureties and bonds. We understand the bonding process and want to ensure that your rights are protected. Contact the Smiley Law Group for a free consultation today.

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