Poyner Spruill is pleased to announce a decisive litigation victory in a construction and surety law dispute arising from the Novus residential tower project in downtown Durham. The firm’s litigation team successfully obtained summary judgment dismissing all claims against its surety client with prejudice, eliminating more than $3.2 million in potential liability exposure under a subcontractor performance bond.
The Poyner Spruill team included Matthew Bouchard, Joey Garfunkel, Abby Jenkins, Tate Ogburn, Alma Friedrich, and Sandy Crishawn.
The case centered on the interpretation of the AIA-A312 performance bond, one of the most widely used bond forms in the construction industry. Poyner Spruill’s legal team argued that the bond claimant failed to satisfy conditions precedent to triggering the surety’s obligations under the bond and deprived the surety of its contractual right to investigate the alleged default and determine an appropriate post-default remedy by undertaking replacement work that prejudiced the surety’s completion rights. The court agreed and dismissed all claims against the surety with prejudice.
The ruling affirms key protections available to sureties under the AIA-A312 bond form and highlights the consequences to bond claimants of bypassing those protections. For owners, contractors, subcontractors, sureties, and other project stakeholders, the decision underscores several important business lessons:
- While a performance bond provides valuable protection in the event of contractor default, contractual procedures required by the bond and by the underlying agreement must be followed to preserve rights and remedies.
- Failure to satisfy notice and other bond requirements can jeopardize otherwise viable claims.
- Early legal guidance can help parties navigate contractor defaults and avoid costly missteps.
- Strategic enforcement of contractual protections can significantly reduce risk and liability exposure.
As construction projects continue to grow in size and complexity, disputes involving delays, contractor defaults, and performance bonds remain a significant source of financial risk. Poyner Spruill’s construction law team helps clients protect their interests, manage risk, and resolve disputes efficiently while keeping business objectives at the forefront.
Poyner Spruill regularly represents owners, developers, contractors, subcontractors, suppliers, sureties, and other industry stakeholders in all phases of construction law, including contract drafting and negotiations; client counseling from groundbreaking through completion; and the resolution of payment, mechanics’ lien, bond, delay, change order, defect, licensure, and termination claims via litigation, mediation, and arbitration throughout North Carolina and beyond.
