bobbarkernar
Jun24-09, 03:44 PM
A contractor furnished a performance bond having a face value of $100,000 and a payment bond of $100,000. The contract price was a lump sum of $1,000,000. The contractor had completed 60 percent of the work and had been paid $540,000 by the owner. Then the contractor defaulted, leaving unpaid bills to workmen and suppliers of $120,000. The owner engaged another contractor to finish the job for $475,000. Does the surety for the performance and payment bonds have to pay anything to the owner? If so, how much, and why?
What I thought was that the Surety would need to pay the full $100,000 of the performance and the full $100,000 of the payment bonds. However I am not sure if the surety would also be required to pay the difference between the new contractor finishing cost of $475,000 and the $460,000 finishing cost of the first contractor.
All together what im thinking is that the surety would have to pay $215,000 to the owner.
What I thought was that the Surety would need to pay the full $100,000 of the performance and the full $100,000 of the payment bonds. However I am not sure if the surety would also be required to pay the difference between the new contractor finishing cost of $475,000 and the $460,000 finishing cost of the first contractor.
All together what im thinking is that the surety would have to pay $215,000 to the owner.