§103D-324  Contract performance and paymentbonds.  (a)  Unless the policy board determines otherwise by rules, thefollowing bonds or security shall be delivered to the purchasing agency andshall become binding on the parties upon the execution of the contract if thecontract which is awarded exceeds $25,000 and is for construction, or thepurchasing agency secures the approval of the chief procurement officer:

(1)  A performance bond in a form prescribed by therules of the policy board, executed by a surety company authorized to dobusiness in this State or otherwise secured in a manner satisfactory to thepurchasing agency, in an amount equal to one hundred per cent of the pricespecified in the contract;

(2)  A payment bond in a form prescribed by the rulesof the policy board, executed by a surety company authorized to do business inthis State or otherwise secured in a manner satisfactory to the purchasingagency, for the protection of all persons supplying labor and material to thecontractor for the performance of the work provided for in the contract.  Thebond shall be in an amount equal to one hundred per cent of the price specifiedin the contract; or

(3)  A performance and payment bond which satisfiesall of the requirements of paragraphs (1) and (2).

(b)  The policy board may adopt rules thatauthorize the head of a purchasing agency to reduce the amount of performanceand payment bonds.

(c)  Nothing in this section shall be construedto limit the authority of the chief procurement officer to require aperformance bond or other security in addition to those bonds, or incircumstances other than specified in subsection (a).

(d)  Every person who has furnished labor ormaterial to the contractor for the work provided in the contract, in respect ofwhich a payment bond or a performance and payment bond is furnished under thissection, and who has not been paid amounts due therefor before the expirationof a period of ninety days after the day on which the last of the labor wasdone or performed or material was furnished or supplied, for which such a claimis made, may institute an action for the amount, or balance thereof, unpaid atthe time of the institution of the action against the contractor and itssureties, on the payment bond or the performance and payment bond, and havetheir rights and claims adjudicated in the action, and judgment renderedthereon; subject to the State's priority on the bonds.  If the full amount ofthe liability of the sureties on the payment bond is insufficient to pay thefull amount of the claims, then, after paying the full amount due the State,the remainder shall be distributed pro rata among the claimants.

As a condition precedent to any such suit,written notice shall be given to contractor and surety, within ninety days fromthe date on which the person did or performed the last labor or furnished orsupplied the last of the material for which claim is made, stating withsubstantial accuracy the amount claimed and the name of the party to whom thematerial was furnished or supplied or for whom the labor was done or performed.

The written notice shall be served byregistered or certified mailing of the notice, to the contractor and surety, atany place they maintain an office or conduct their business, or in any mannerauthorized by law to serve summons.

(e)  Every suit instituted under subsection (d)shall be brought in the circuit court of the circuit in which the project islocated, but no such suit shall be commenced after the expiration of one yearafter the day on which the last of the labor was performed or material wassupplied for the work provided in the contract.  The obligee named in the bondneed not be joined as a party in any such suit.

The terms "labor" and"material" have the same meanings in this section as the terms areused in section 507-41. [L Sp 1993, c 8, pt of §2; am L 1997, c 349, §2 and c352, §23]

 

Note

 

  L 1997, c 349 amendment applies to all contracts awardedafter July 1, 1997.  L 1997, c 349, §4.