Contractor broke up major job into four smaller sections to be under the $100,000 dollar requirement for a bond. What recourse do we have to collect on this?
1 reply
Feb 13, 2019
I'm sorry you have found yourself in a situation in which there appears to be no security available against which to make a claim for payment. It is very frustrating when the protections that are supposed to be in place for the protection of parties supplying labor or materials to the project are circumvented.
The absence of a bond on a public project means that the attempt to recover must proceed directly against the non-paying party, instead of against the bond. If the non-paying party is not the GC, there may be a way to include the GC (or potentially even the public entity) in the suit if the failure to obtain a bond was fraudulent.
If the amount due meets the requirements, a small claims case could be initiated in order to reduce costs. Otherwise, a "full-blown" lawsuit is the likely remedy. There are multiple potential causes of action that can be relied upon in the suit, however. There's clearly breach of contract, but there are also potential unjust enrichment claims, or claims under Arizona's prompt payment statutes. Additionally, a claim might be possible against the contractor's license bond, with the benefit that if the claim is uncontested a lawsuit is not necessary to collect.
Finally, other than initiating a lawsuit, a party could place the account with an inside or outside collections team, but experiences and effectiveness differ drastically.