This section discusses the various types of bonds used for private projects and their requirements.
(1) Payment and performance bonds
A party may obtain a so-called "common-law bond" for private projects. Common-law bonds are bonds not issued pursuant to a statute. Unless expressly stated otherwise, third-party suppliers of labor and
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material have no right to claim against a common-law bond on private construction projects. Brower Co. v. Noise Control of Seattle, Inc., 66 Wn.2d 204, 208,401 P.2d 860 (1965) (no showing of intention to a bond for the benefit of suppliers).
This result is illustrated by Spokane Merchants Ass'n v. Pacific Surety Co., 86 Wash. 489, 490, 150 P. 1054 (1915). In Spokane Merchants, the prime contractor entered into a contract with the state of Washington to build a road and executed the required statutory performance and payment bonds. The subcontractor entered into a subcontract to furnish supplies and executed a common-law bond conditioned, in part, to ensure performance and payment. The subcontractor became indebted to his suppliers. The court held that, because there was no privity of contract between the injured parties (the suppliers) and the surety, the injured parties had no claim against the bond.
| Practice Tip: | There are numerous forms of private bonds, the most common of which is published by the American Institute of Architects (AIA). Terms vary and can also be changed by rider. It is imperative to read the terms of every bond as with all contracts. |
(2) Mechanics' lien discharge bonds
A private owner of real property subject to a recorded claim of lien who disputes the correctness of a lien may record a bond issued by an authorized surety company. RCW 60.04.161. Contractors, lenders, or other lien claimants who dispute the correctness of a claim may also post a bond. Id. The bond must contain a description of the lien claim and the real property involved; it also must be in an amount equal to the greater of $5,000 or twice the amount of the lien claimed if the lien is $10,000 or less, and in an amount equal to or greater than one and one-half times the amount of the lien if the lien is more than $ 10,000. Id.
The bond must be conditioned "to guarantee payment of any judgment upon the lien in favor of the lien claimant entered in any action to recover the amount claimed in a claim of lien, or on the claim asserted in the claim of lien." Id. The effect of recording such a bond is "to release the real property described in the notice of claim of lien from the lien and any action brought to recover the amount claimed." Id. Unless otherwise prohibited by law, if no action is commenced to recover on a lien within eight calendar months after the claim of lien has been recorded (see RCW 60.04.141), the surety is discharged from liability under the bond. Id.
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To be entitled to the...
