Rights of Certain Parties Claiming Protection Under a Payment Bond or Security Deposit; Notice of Commencement of Work

1. Law
2. Georgia Code
3. Commerce and Trade
4. Suretyship
5. Relative Rights of Creditor and Surety
6. Rights of Certain Parties Claiming Protection Under a Payment Bond or Security Deposit; Notice of Commencement of Work

1. Where a payment bond or security deposit is provided pursuant to a contract for the construction of an improvement to property other than a public work, every person entitled to claim the protection of the payment bond or security deposit who has not been paid in full for labor or material furnished in the prosecution of the work referred to in such bond or security deposit after the last of the labor was done or performed by him or her or the material or equipment or machinery was furnished or supplied by him or her for which such claim is made, or when he or she has completed his or her subcontract for which such claim is made, shall have the right to bring an action on such payment bond or security deposit in accordance with the terms thereof for the amount, or the balance thereof, unpaid at the time of the commencement of such action and to prosecute such action to final execution and judgment for the sum or sums due him or her; provided, however, that any person having no contractual relationship express or implied with the contractor furnishing such payment bond or security deposit on a project where the contractor has complied with the Notice of Commencement requirements in accordance with subsection (b) of this Code section shall not have the right to bring an action on such payment bond or security deposit in accordance with the terms thereof unless such person gave to the contractor within 30 days from the filing of the Notice of Commencement or 30 days following the first delivery of labor, material, machinery, or equipment, whichever is later, a written Notice to Contractor setting forth:
   1. The name, address, and telephone number of the person providing labor, material, machinery, or equipment;
   2. The name and address of each person at whose instance the labor, material, machinery, or equipment are being furnished;
   3. The name and location of the project set forth in the Notice of Commencement; and
   4. A description of the labor, material, machinery, or equipment being provided and, if known, the contract price or anticipated value of the labor, material, machinery, or equipment to be provided or the amount claimed to be due, if any.
2. Where a payment bond or security deposit is provided pursuant to a contract for the construction of an improvement to property other than a public work, the contractor furnishing the payment bond or security deposit shall post on the project site and file with the clerk of the superior court of the county in which the project is located a Notice of Commencement no later than 15 days after the contractor physically commences work on the project and give a copy of the Notice of Commencement to any subcontractor, materialman, or person who makes a written request of the contractor. Failure to give a copy of the Notice of Commencement within ten calendar days of receipt of the written request from the subcontractor, materialman, or person shall render the notice to contractor requirement of subsection (a) of this Code section inapplicable to the subcontractor, materialman, or person making the request.The Notice of Commencement shall include:
   1. The name, address, and telephone number of the contractor;
   2. The name and location of the project being constructed and the legal description of the property upon which the improvements are being made;
   3. The name and address of the true owner of the property;
   4. The name and address of the person other than the owner at whose instance the improvements are being made, if not the true owner of the property;
   5. The name and the address of the surety for the performance and payment bonds, if any;
   6. The name and address of the construction lender, if any; and
   7. The name and address of the holder of the security deposit provided, if any.
3. The failure to file a Notice of Commencement under subsection (b) of this Code section shall render the Notice to Contractor requirements of subsection (a) of this Code section inapplicable.
4. The clerk of the superior court shall file the Notice of Commencement provided for in this Code section within the records of that office and maintain an index separate from other real estate records or an index with the preliminary notices of lien specified in subsection (a) of Code Section 44-14-361.3.Each such Notice of Commencement shall be indexed under the name of the true owner and the contractor as contained in the Notice of Commencement.

(Code 1981, §10-7-31, enacted by Ga. L. 1994, p. 870, § 1.)

Law reviews.

- For survey article on construction law, see 59 Mercer L. Rev. 55 (2007).

JUDICIAL DECISIONS

Judgment on the pleadings reversed.

- Construing the pleadings in a light most favorable to showing a question of fact in an action in which: (1) the pleadings did not disclose with certainty that a supplier would not be entitled to relief in the supplier's action against a general contractor and the contractor's surety; and (2) the appeals court did not consider the supplier's averments that the supplier's "Notice to Owner/Contractor" complied with O.C.G.A. §§ 10-7-31 and44-14-361.5 or its admission that it received a copy of the notice of commencement to establish that the general contractor's notice of commencement was otherwise proper and timely filed as required by the statutes, the general contractor and the contractor's surety were not entitled to judgment on the pleadings. Consol. Pipe & Supply Co. v. Genoa Constr. Servs., Inc., 279 Ga. App. 894, 633 S.E.2d 59 (2006).

Payment bond not substitute collateral.

- In the general contractor's action against the materials provider relating to the provider's request for payment under a payment bond, the trial court erred by declaring that the payment bond obtained and recorded by the general contractor served as substituted collateral for the construction project and in discharging the materialmen's lien filed by the provider; O.C.G.A. § 10-7-31 was silent on the issue of how or whether the bond affected materialmen's liens, and, under O.C.G.A. § 44-14-364(a), the bond did not satisfy the essential requirements of a lien release bond since the bond was obtained before the provider filed its lien claim and there was nothing indicating that the bond was issued with good security approved by the clerk. Sierra Craft, Inc. v. T. D. Farrell Constr., Inc., 282 Ga. App. 377, 638 S.E.2d 815 (2006), cert. denied, No. S07C0460, 2007 Ga. LEXIS 145 (Ga. 2007).

Notice adequate.

- In the general contractor's action against the materials provider relating to the provider's request for payment under a payment bond, the general contractor's notice of commencement and the provider's notice to contractor complied with O.C.G.A. § 10-7-31; although the notice of commencement stated that the notice was pursuant to O.C.G.A. § 44-14-361.5 and the notice to contractor stated that the notice was sent under O.C.G.A. § 44-14-361, O.C.G.A. § 10-7-31 did not require that either of the notices be expressly labeled as being provided under the statute, the notices contained the pertinent information contemplated by O.C.G.A. § 10-7-31, including that the general contractor had provided a payment bond and that the provider had provided materials for the project through improvements made by the subcontractor, and the notice of commencement was not misfiled under O.C.G.A. § 10-7-31(d) because it was labeled as provided under O.C.G.A. § 44-14-361.5 as the indexing requirements of both statutes were substantially identical. Sierra Craft, Inc. v. T. D. Farrell Constr., Inc., 282 Ga. App. 377, 638 S.E.2d 815 (2006), cert. denied, No. S07C0460, 2007 Ga. LEXIS 145 (Ga. 2007).

Notice to contractor deficient.

- Trial court did not err in granting a general contractor and its surety summary judgment in a supplier's action to recover under a payment bond and a lien discharge bond for monies a subcontractor owed it for materials it supplied to a construction project because the supplier's notice to contractor failed to comply with O.C.G.A. §§ 10-7-31(a) and44-14-361.5(c) because the notice wholly omitted required information; although the supplier's notice to contractor set forth the subcontractor's name, it failed to provide any address for the subcontractor as required under §§ 10-7-31(a)(2) and44-14-361.5(c)(2), and although the notice set forth the name of the project, it failed to state the location of the construction project pursuant to §§ 10-7-31(a)(3) and44-14-361.5(c)(3). Consol. Pipe & Supply Co. v. Genoa Constr. Servs., 302 Ga. App. 255, 690 S.E.2d 894 (2010).

Notice did not limit the future claims of supplier.

- Although the materials provider, in seeking payment under a payment bond, incorrectly stated in the notice to contractor that the contract price for its provision of materials was $20,000, it was not limited to recovery of that amount. O.C.G.A. § 10-7-31(a)(4), dictating the contents of a notice to contractor, did not limit the future claims of a notifying supplier. Sierra Craft, Inc. v. T. D. Farrell Constr., Inc., 282 Ga. App. 377, 638 S.E.2d 815 (2006), cert. denied, No. S07C0460, 2007 Ga. LEXIS 145 (Ga. 2007).

ARTICLE 3 RIGHTS OF SURETY AGAINST PRINCIPAL, COSURETIES, AND THIRD PERSONS

RESEARCH REFERENCES

ALR.

- Incapacity of principal to contract as affecting liability of guarantor or surety, 24 A.L.R. 838; 43 A.L.R. 589.

Duty of bank to sureties or endorsers as to application of general deposit by principal, 70 A.L.R. 339.

Right of surety or one secondarily liable to bring an action before payment of obligation to set aside fraudulent conveyances by principal, 71 A.L.R. 354.

Right of sureties on bond to take advantage of noncompliance with statutory requirement as to approval of bond, 77 A.L.R. 1479.

Liability of surety on subcontractor's bond to principal contractor for public improvement or to his surety, in respect of claims for labor or materials furnished to subcontractor, 117 A.L.R. 662.

Right of principal, cosureties, or coguarantors to benefit of discount at which obligation is purchased or discharged by a surety or guarantor, 118 A.L.R. 416.

Right of surety on bond of trustee, executor, administrator, or guardian to terminate liability as regards future defaults of principal, 118 A.L.R. 1261; 150 A.L.R. 485.

Right of surety on fidelity bond to allowance or refund where obligee makes recovery from principal or other sources, 126 A.L.R. 946.

Basis upon which surety paying part of creditor's claim may participate in dividends from insolvent estate of principal, where other part of claim is paid by proceeds of collateral security or by prior dividends, 138 A.L.R. 517.

Release of one of joint and several defalcating tortfeasors as releasing insurer which was surety on fidelity bond of each, 35 A.L.R.2d 1122.

Relative rights, as between surety on public work contractor's bond and unpaid laborers or materialmen, in percentage retained by obligee, 61 A.L.R.2d 899.

Computation of net "loss" for which fidelity insurer is liable, 5 A.L.R.5th 132.

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