INTRODUCTION TO OTHER (Non-AIA) BOND FORMS
EJCDC Bond Forms
C-430 Bid Bond-Penal Sum Form (2007)

The C-430 Bid Bond provides for the forfeiture of the penal sum of the bond upon the
default of the Bidder. A default shall occur upon the failure of the Bidder to deliver
within the time required by the Bidding Documents (or any extension thereof agreed to in
writing by Owner) the executed Agreement required by the Bidding Documents and any
performance and payment bonds required by the Bidding Documents.

Payment of the penal sum is the extent of the Bidder’s and Surety’s liability and recovery
of the penal sum under the terms of the C-430 Bid Bond is the Owner’s sole and
exclusive remedy upon default of the Bidder.

Other interesting provisions contained in the C-430 Bid Bond form include (1) a
requirement that payment under the bond is due and payable within 30-days of receipt of
written notice of the Bidder’s default; (2) the surety waives notice of any and all defenses
based on or arising out of any time extensions to issue Notice of Award, provided that the
total time for issuing the Notice of Award shall not exceed 120-days in the aggregate; and
(3) the bond form shall be deemed to include any applicable statute that has been omitted
from the bond form as if fully recited at length.
C-435 Bid Bond-Damages Form (2007)

Unlike the EJCDC C-430 Bid Bond, which sets the surety’s liability at the defined penal
sum, the C-435 Bid Bond provides: “Bidder and Surety, jointly and severally, bind
themselves….to pay to Owner upon default of Bidder any difference between the total
amount of Bidder’s Bid and the total amount of the Bid of the next lowest, responsible
Bidder who submitted a responsive Bid ad determined by Owner for the work required by
the Contract Documents…”

If there is no such “next lowest, responsible Bidder,” and the Owner has not abandon the
project, then the surety shall be liable to pay the owner the penal sum set forth on the face
of the bond form. In no event shall the surety’s obligations shall exceed the penal sum.
C-610 Construction Performance Bond (2007)

EJCDC C-610 Construction Performance Bond (2007) provides that “[i]f the Contractor
performs the Contract, Surety and Contractor have no obligation under this Bond, except
to participate in conferences as provided in Paragraph 2.1.”

EJCDC C-610 requires the owner to “formally terminate the Contractor’s right to
complete the Contract” in addition to declaring a default. This language places the
burden squarely upon the owner to follow all formal termination protocols set forth in the
underlying construction contract and have a valid basis for terminating the contractor.
Failure on either regard could provide the surety a defense to a subsequent performance
bond claim.

Once an owner has satisfied the conditions in paragraph 2, the EJCDC C-610 places
responsibility on the surety to be responsive by taking one of the following actions:
o Arrange for Contractor, with consent of Owner, to perform and complete the
Contract; or
o Undertake to perform and complete the Contract itself; or
o Obtain bids or negotiated proposals from qualified contractors acceptable to
owner for completion of the Contract; or
o Waive its right to perform and complete, and after investigation determine the
amount for which it may be liable to Owner or deny liability in whole or in part.

The surety must proceed with one of these options “with reasonable promptness.” The
surety shall be deemed to be in default of the performance bond if, after 15 days of
receiving an additional written notice from the owner demanding performance of its
obligations, the surety fails to do so.

If the surety undertakes the responsibility to perform and complete, the surety, under
certain circumstances, may be obligated for the costs of correcting defective work
performed by the Contractor; additional legal, design professional, and delay costs
resulting from Contractor’s Default; and liquidated damages or actual damages caused by
delayed performance by the Contractor.1 However, the Surety’s liability for these types
of costs are limited to the amount of the bond.
C-615 Construction Payment Bond (2007)

1
C-615 Construction Payment Bond form specifically provides that, with respect to the
Owner, the surety’s obligation shall be null and void if the Contractor (1) promptly
makes payment, directly or indirectly, for all sums due Claimants and (2) defends,
indemnifies and holds harmless the Owner from all claims, demands, liens or suits
alleging non-payment by the Contractor.
Id. at ¶5.

Another unique aspect of the C-615 Construction Payment Bond (2007) is the use of the
defined term “Claimant.” Claimant is defined as:
An individual or entity having a direct contract with Contractor, or
with a first-tier subcontractor of Contractor, to furnish labor,
materials, or equipment for use in the performance of the Contract.
The intent of this Bond shall be to include without limitation in the
terms “labor, materials or equipment” that part of water, gas,
power, light, heat, oil, gasoline, telephone service, or rental
equipment used in the Contract, architectural and engineering
services required for performance of the Work of Contractor and
Contractor’s subcontractors, and all other items for which a
mechanic’s lien may be asserted in the jurisdiction where the labor,
materials, or equipment were furnished.2

The original C-615 Construction Payment Bond (2007) required the payment bond surety
to answer a claim within 45 days. Similar to the 45 period contained in the A312-1984
Payment Bond Form, this 45 day period for the surety to respond to payment bond claims
was fairly uncontroversial until some courts began strictly construing this timing
provision against sureties by striking otherwise valid surety defenses not asserted within
the 45 day time period. This line of cases and EJCDC’s reaction to them is discussed
later.

The interim change to the C-615 Construction Payment Bond form promulgated by
EJCDC simply removed paragraph 6, which required the surety to respond within 45
days of receiving a payment bond claim. A new form, EJCDC C-615(A), was published
with the support of the Surety and Fidelity Association of America and the National
Association of Surety Bond Producers.3
ConsensusDOCS Bond Forms
ConsensusDOCS 260: Performance Bond

ConsensusDOCS 260 Performance Bond form is a shorter and simpler document than its
more complex counterpart, the AIA A312. However, there are still many similarities
shared by the two publications.

The ConsensusDOCS 260 Performance Bond contains language waiving the surety’s
right to be notified of changes to the underlying contract. However, the language in the
ConsensusDOCS 260 Performance Bond is somewhat narrower, providing a waiver by
the surety of any notice of “alterations or extensions of time made by the Owner in the
2
3
Id. at ¶ 15.1.
Id.
Contract.” The surety is only waiving notices of change of the time of completion of the
work, not to changes in the scope of the work.

ConsensusDOCS 260 Performance Bond does not contain such a condition before
declaring a principal in default and does not require the parties to “meet and confer” prior
to the declaration of default by the Owner. However, the ConsensusDOCS 260 does
provide for the traditional declaration of default. Specifically, this bond form states that
“[i]f the Contractor is in default pursuant to the Contract and the Owner has declared the
Contractor in default, the Surety promptly may remedy the default or shall…”

ConsensusDOCS 260 also gives the surety the traditional options of completion,
payment, or denial of the claim. However, under the completion option, the surety’s
liability appears limited to the “completion of the construction work.” 4 Conversely, the
A312-1984 delineates more specifically that the surety is liable for the correction of
defective work as well as the completion of the work; additional legal, design
professional, and delay costs; and liquidated damages, if provided by the underlying
contract.

ConsensusDOCS 260 and the A312 bond forms is the accrual point for the running of the
two-year limitation period to file a lawsuit against the surety. Although this contractual
limitation is subject to any shorter or longer period prescribed by applicable statute,
which may also control when the time limitation to sue the surety begins to run, the A312
provides for three possible accrual points, whereas the ConsensusDOCS 260 only
provides one accrual point.
ConsensusDOCS 261: Payment Bond

The ConsensusDOCS 261 Payment Bond form is a very straight forward bond form that
binds the Contractor and surety to ensure payment of “all sums for all labor, materials,
and equipment furnished by Claimants as defined by the bond form.

If the Contractor pays “all sums for all labor, materials, and equipment furnished for use
in the performance of the work required by the contract” the surety’s obligations under
the bond become null and void.

Surety waives any right to be notified of alterations or extensions of time made by the
owner in the contract. This waiver language is more restrictive than the waiver notice
included in the AIA A312, which provides that the surety waives notice of “any change,
including changes of time to the construction contract or to related subcontracts, purchase
orders and other obligations.”5
4
5
Id.; see also ConsensusDOCS 260 Performance Bond, ¶ 2.
AIA A312-1984 § 10.

Claimant is defined as “an individual or entity having a direct contract with the contractor
or having a contract with a subcontractor having a direct contract with the contractor to
furnish labor, materials or equipment for use in the performance of the Contract.”

The most significant contrast of the ConsensusDOCS 261—Payment Bond form is its
lack of any 45-day (or 60-day) deadline for the surety to respond to payment bond claims.
ConsensusDOCS 262: Bid Bond

ConsensusDOCS 262 is a typical “damage-type” bid bond where the surety is liable to
the owner for the difference between the amount of Contractor’s bid and the amount of
such agreement the owner in good faith executes with another party to perform the work
covered by Contractor’s bid, but not to exceed the bond penal sum.

One significant difference with the ConsensusDOCS 262—Bid Bond is the absence of
any language requiring conforming payment and performance bonds to be procured from
a “good and sufficient surety”, but simply relies upon the Contractor to procure such
bonds or bonds as are specified in the contract documents for the faithful performance of
the work and for the prompt payment for labor and materials furnished in the
performance of the work.

No timeframe in which the surety is to make payment under the bond.
30th IRMI Construction Risk Conference
November 14 -18, 2010
The Peabody Orlando
http://www.irmi.com/conferences/crc/default.aspx
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