Over the past several years, modular construction has been on the rise and this method of construction has been used in the creation of health care facilities, education facilities, and apartment buildings. With the increased demand for housing, the popularity and use of modular construction has grown even more rapidly throughout the industry. In response to modular construction’s growing popularity, in 2020, the ConsensusDOCS Coalition released the first industry-standard contract document in this area—the ConsensusDOCS 753 – Standard Subcontract for Prefabricated Construction.  On February 2, 2023, the ConsensusDOCS Coalition announced the publication of the ConsensusDOCS 253 Prime Agreement and General Conditions for an owner to procure prefabricated construction materials and components. This is the industry’s first standard prime-level contract document to address the unique features and legal implications created by the prefabrication process. The ConsensusDOCS 253 provides best practices and risk allocation when the owner purchases the prefabricated components directly from the prefabricator.

ConsensusDOCS 253 follows the risk allocation principles of the ConsensusDOCS 200 Standard Owner/Constructor Agreement and General Terms and Conditions, allowing an Owner to contract directly with the Prefabricator with an “off-the-shelf” standard agreement. The contract document presumes the scenario wherein an Owner purchases a prefabricated component made at the prefabricator’s site which is then delivered and installed at the worksite. The contract document includes:

  • Industry standard definitions for Fabrication Site, a prefabricated Component, and a prefabricated Storage Area;
  • Guidance for users to delineate work to be performed off-site versus at the worksite in an exhibit;
  • Provisions specifying adequate storage areas that must be provided for prefabricated components;
  • Notice provisions for inspections of the Prefabricator’s site which allows Prefabricator’s protection of sensitive proprietary information;
  • Provisions acknowledging that a Prefabricator’s fabrication methods may be confidential;
  • Provisions addressing warranty issues when a Prefabricator acts as a manufacturer versus providing other materials and equipment that are incorporated in the Work;
  • Provisions addressing several scenarios regarding the risk of loss of a prefabricated component during different stages of transportation and delivery; and
  • Option for upfront payment to account for the large capital outlays needed to make prefabricated components.

For more information on the ConsensusDOCS 253 Standard Agreement and General Conditions Between Owner and Prefabricator, please visit ConsensusDOCS.

A typical prevailing party contract provision allows the prevailing party in litigation or arbitration to recover their attorney’s fees from the other party. It is an attractive provision when negotiating a construction contract and its existence often weighs on the decision to pursue litigation or arbitration. However, which party “prevails” is not always easy to determine. What happens if both parties bring claims and both prevail on certain aspects of the underlying case? The Rhode Island Supreme Court recently weighed in on this issue in Clean Harbors Environmental Services v. 96-108 Pine Street, LLC, 286 A.3d 838 (R.I. 2023).

The Clean Harbors case involved a contract with the following typical prevailing party provision: “If any party to this Contract brings a cause of action against the other party arising from or relating to the Contract, the prevailing party in such proceeding shall be entitled to recover its reasonable attorney fees and court costs.” One party brought claims for breach of contract and unjust enrichment and the other party countered with its own breach of contract claim for liquidated damages. The case was tried, and the trial court awarded damages to both parties on their respective claims. Both parties subsequently moved the court for their respective attorney’s fees and court costs. Because there was no guiding legal precedent in Rhode Island, the court relied on case law from other jurisdictions, which allow a court considerable discretion on awarding attorney’s fees when faced with a split decision and a contractual fee-shifting provision. The trial court determined that since both parties prevailed on their respective claims, neither party prevailed and declined to award attorney’s fees to either party. The party awarded the larger judgment appealed this decision seeking its attorney’s fees.

The Supreme Court closely examined the prevailing party provision in light of relevant case law in other jurisdictions and decided that a more flexible approach, affording the trial judge greater discretion, was most acceptable to determine the prevailing party where both or neither party may be considered to have prevailed. The Supreme Court vacated the trial court decision seeking a “more comprehensive, fact-intensive and case-specific analysis” from the trial judge.  Id. at 846. The case was remanded to the Superior Court for a determination of the prevailing party by considering:

(1) the contractual language; (2) the number of claims, counterclaims, cross-claims, etc., brought by the parties; (3) the importance of the claims relative to each other and their significance in the context of the lawsuit considered as a whole; and (4) the dollar amounts attached to and awarded in connection with the various claims, as well as whether compelling circumstances exist to justify a finding that both parties, or neither party may be considered to have prevailed.

Id. (internal quotations omitted).

The Court’s guidance does not appear to make a decision on attorney’s fees any easier. Rather than allow a court discretion to analyze and interpret a potentially unclear prevailing party provision, the contract should clearly define what it means to prevail at arbitration or litigation so that the Court only has to enforce it. Such definition should not only cover the situation where both sides prevail but also what it means to prevail in the first instance. For example, in order to prevail, must one recover a minimum percentage, say 80 percent, of the amount of the initial claim asserted to be entitled to recover attorney’s fees? Such a requirement would serve the dual purpose of clearly defining a win (which should be simple to enforce) and encouraging realistic initial claims which increase the chance of prevailing under the definition. Take the time to negotiate and agree upon what it means to prevail in litigation or arbitration. The language should be tailored to the particular circumstances of each contract. Otherwise, you run the risk and additional expense, which may not be recoverable, of allowing a decision-maker to interpret a contract provision differently than what the parties intended.

Below is an excerpt of an article published in Construction Executive on February 21, 2023 co-authored by Robinson+Cole Labor and Employment Group lawyers Abby M. Warren and Sapna K. Jain.

Since last fall, news of layoffs in the technology sector have set off a ripple effect in a variety of other industries. Companies engaging in layoffs must be thoughtful and prepared when it comes to taking such action. While the construction industry generally has one of the highest layoff rates, and human resource personnel may be very knowledgeable with regard to related risks and exposure, there are a number of additional issues to consider when there are mass layoffs or closings. Further, expensive litigation awaits if companies are not meticulous in complying with state and federal laws regarding such large scale reductions in force.

Under federal law, the primary legislation governing mass layoffs and closing is the Worker Adjustment and Retraining Notification (“WARN”) Act which generally covers employers with 100 or more employees. This law was enacted to protect employees by requiring companies to provide 60 days’ notice to employees in advance of certain plant closings and mass layoffs. In addition, many states, such as California, Connecticut and New York, have enacted similar state laws, referred to as “mini-WARN” laws, which impose additional requirements, including increasing the length of the required advance notice and broadening the scope of employers to which the law applies. Read the full article.

Cyber-crime is an increasingly prominent threat to many industries, and construction is no exception. With the growing use of digital technologies in what was once a primarily “offline” industry, cyber-attacks can pose a significant threat at every level of the construction industry. The construction industry routinely handles sensitive information that is of value to cybercriminals, including project plans, client information, financial records, and employee data. Furthermore, due to the tight project deadlines and complicated project scheduling common in the construction industry, it can be particularly susceptible to ransomware attacks that disrupt critical digital assets to extort “ransom” from their victims. Struck by a ransomware attack at the wrong time, a contractor, construction manager, or design professional may face the unenviable position of choosing between contractual penalties for delay or paying an anonymous hacker large sums of money to free compromised data or digital systems.

As with the many other business risks faced by the industry, the response of many players in the industry is to obtain insurance. While cyber-attacks are usually excluded from standard Commercial General Liability (CGL) policies, many major insurers now offer optional coverage under a Professional Errors and Omissions policy or through standalone cyber insurance. While insurance can afford some degree of protection against attacks, this is an imperfect defense at best. Disruption or damage caused by a cyber-attack can be expensive, with data breaches and ransomware attacks often costing even comparatively small victims millions of dollars per attack in direct costs. These amounts can easily exceed policy limits. Downstream costs (such as loss of intellectual property, reputational damage, and  in some cases, legal liability to the owners of compromised information) are often nearly or entirely uninsurable.

Additionally, companies have seen a rise in cyber-attacks lead by hostile state actors. Often originating from countries hostile to the United States (such as Russia, China, North Korea, and Iran), these attacks are uniquely dangerous to companies due to their sophistication and because most cyber insurance policies contain exclusions for “hostile or warlike actions.” Although still a developing area of the law, particularly given the ambiguity about whether a cyber-attack that does not cause physical damage, but nonetheless carries heavy economic costs, is a “warlike” action, the exclusion risks a denied policy claim. Further, because cyber-attacks by state actors often involve state secrets or national security concerns, insureds often have difficulty developing the facts around the cyber-attack, complicating efforts to recover under their policy.

Despite its limitations, construction industry actors may want to consider obtaining or at least looking into cyber insurance or adding it as coverage to one of its existing forms of insurance. While it should not be relied upon as a sole means of protection, it may help mitigate the risk that modern construction companies face. Practicing proper digital hygiene by implementing strong cybersecurity measures like firewalls, multi-factor authentication, encryption, and air gapping sensitive data, could be an essential, and unfortunately often neglected, safeguard in today’s digital economy.

California law will soon require businesses to treat their employees and business partners as consumers under the California Consumer Privacy Act (CCPA). The CCPA and its successor legislation, the California Privacy Rights Act (CPRA), grant California consumers dignitary rights over their personal information collected and processed by commercial entities that do business in California. The CCPA applies to to such entities that do business in California and collect California consumers’ personal data, have annual gross revenues over $25 million, possess the personal information of 100,000 or more consumers, or earn more than half of their yearly income from brokering data.

Employee, Job Applicant and 1099 Contractor Data

Previously, the CCPA excluded employee data; however, this exemption is set to expire on December 31, 2022. The California State Legislature defied expectations by ending the 2022 legislative session without passing an extension. While the legislature may pass a new exemption in its next legislative session, businesses subject to the CCPA should prepare to process employee CCPA requests as of January 1, 2023.

Fortunately, most businesses already have HR processes to allow employees to access and correct their personal data. Existing OSHA and EEOC record-retention-requirements will also cover most employee data, meaning that it will likely be exempt from deletion requests under the CCPA (i.e., the data cannot be deleted in order to “comply with a legal obligation”).  However, companies must now also allow job applicants to know, view, delete, and correct personal information, and EEOC regulations require businesses to retain applicant records for one year. Businesses must keep close track of when that obligation ends and allow applicants to delete their data as soon as that is legally permissible.

B2B Data

The CCPA also included an exemption for business-to-business (B2B) data collected from agents or representatives of other businesses. However, this exemption also is set to expire on December 31, 2022. As of January 1, 2023, California B2B contacts have the right to know, view, correct, and delete personal information. Some personal information may be exempted as necessary to “complete the transaction for which the personal information was collected, fulfill the terms of a written warranty or product recall conducted in accordance with federal law, provide a good or service requested by the consumer, or reasonably anticipated by the consumer within the context of a business’s ongoing business relationship with the consumer, or otherwise perform a contract between the business and the consumer.” However, companies will need to think outside the box when responding to these requests. Unlike employee and general consumer data, which companies typically collect in a centralized system, B2B data might be scattered across systems tracking emails, contracts, accounts payable, and countless other business processes.

How Can You Prepare?

  • Inventory Your Employee + B2B Data: Businesses should review employee and applicant information (as well as 1099 contractors) to confirm that their privacy notice correctly describes the categories of personal information they collect and process in order to identify “sensitive personal information” subject to the new CPRA right. Businesses should pay special attention to B2B data and clearly document which categories of personal data are stored and on which systems.
  • Enter into Data Processing Agreements with Service Providers: Businesses that use third-party HR software such as Workday and ServiceNow should add data processing addendums that include specific required terms to their contracts. The CCPA requires these agreements with all service providers, including providers that process employees’ personal information.
  • B2B Portals or Websites: If your business collects B2B contact information via a portal or website, you may need to update your privacy policy and include specific provisions required under the CCPA/CPRA.

These are just basic steps. However, if you haven’t assessed whether the CCPA applies to your business, now is the time. And, after that assessment is done, it could mean implementation of a compliance program to avoid fines and penalties and private actions against your business.

This post was authored by Linn Freedman, Kathryn Rattigan, and Blair Robinson (non-lawyer intern) and is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

The U.S. Department of Transportation (USDOT) recently announced that it will offer more low-cost flexible financing for both transit and Transit Oriented Development projects under the Transportation Infrastructure Finance and Innovation Act (TIFIA).  The TIFIA program is intended to help project sponsors reduce costs and speed up the delivery of transit projects.  More applicants will now be eligible for low-cost flexible financing for up to 49 percent of eligible project costs for projects that meet certain eligibility requirements.  Previously, most TIFIA loans were capped at 33 percent of eligible project costs.  Each project must cost at least $10 million and comply with applicable federal regulations and policies associated with federal funding programs.

For transit projects, sponsors of projects may apply for loans up to 49 percent of project costs that are eligible for assistance under Chapter 53 of Title 49 of the U.S. Code.  This Chapter covers transportation projects that construct or improve public transportation systems, including any capital project or associated improvement eligible for Federal Transit Administration funding, such as infrastructure and vehicles for bus, subway, light rail, commuter rail, trolley, or ferry systems.

For Transit Oriented Development, eligibility for such loans extends to projects that are eligible for assistance under 23 U.S.C.A 601(a)(12)(E), which includes projects located within walking distance of, and accessible to, a fixed guideway transit facility, passenger rail station, intercity bus station or intermodal facility, as well as projects for economic development, including commercial and residential development, and related infrastructure and activities.  Such projects must also have a high probability of commencing the contracting process for construction within 90 days after a loan is provided and a high probability of reducing the need for financial assistance under any other federal program for the relevant passenger rail station or service by increasing ridership, tenant lease payments, or other activities that generate revenue exceeding costs. 

To achieve its goal of better connecting people to housing, jobs, schools, and public transportation, the USDOT is prepared to provide technical assistance on innovative transit-related concepts and to support project sponsors through the loan approval process.  Additional information can be found at buildamerica@dot.gov.

The Department of Transportation (DOT) recently published a notice in the Federal Register of proposed rulemaking (NPRM) to amend the Disadvantaged Business Enterprise (DBE) and the Airport Concession Disadvantaged Business Enterprise (ACDBE) regulations.  87 Fed. Reg. 43620 (July 21, 2022). This proposal is the first NPRM update since 2014.  While the DOT was originally scheduled to close the comment period on September 19, 2022, it agreed to extend the comment period until October 31, 2022, to provide sufficient time to prepare and submit comments to the docket. 

The proposed revisions to the regulations were drafted by the DOT’s Office of Civil Rights, together with the Federal Aviation Administration (FAA), the Federal Highway Administration and the Federal Transit Administration, in an effort to help small businesses better compete for contracts on aviation, highway, and transit projects with federal funding.  While some of the NPRM changes were minor, others would significantly expand program eligibility and modify airport sponsors’ regulatory duties.  The bulk of the NPRM addresses the DBE program, which is regulated under Part 26 of Title 49 of the Code of Federal Regulations (CFR) and contains approximately 20 changes (found here.)  Highlights of some significant changes are summarized below.

Personal Net Worth – Perhaps the most significant change is the proposal to increase the Personal Net Worth (PNW) cap for owners of both DBEs and ACDBEs from $1.32 million (last adjusted in 2011) to $1.6 million and exclude retirement assets from the calculation.  Additionally, community property rules are excluded and while “household contents” of the primary residence are still divided equally, the NPRM is modified to clarify that motor vehicles of any type belong to the person who holds the title. Finally, the DOT may make future adjustments to this amount without the need for rulemaking by using Federal Reserve data.  Such modifications should allow more owners to qualify as DBEs and permit existing DBEs to stay in the program longer.   

Ownership Requirements – The NPRM replaces the “real, substantial, and continuing” capital contribution standard with a less-rigid standard of “reasonable economic sense.”  Further, the NPRM clarifies that ownership investment includes purchases, capital infusions, gifts, and additional investments after initial ownership.  Additionally, the marital property provision has been removed.  These modifications that are no longer so narrowly construed provide owners with more flexibility for demonstrating contributions toward ownership.

Limits Total DBE supplier Goals –  The NPRM reduces the allowable credit for a prime contractor’s expenditures with DBE suppliers (manufacturers, regular dealers, distributors, and transaction facilitators) from 60 percent to 50percent of the contract goal.  However, exceptions may be granted by the DOT on a one-off basis, if prior approval is sought and obtained.  This modification is intended to limit a contractor’s ability to receive substantial DBE credit for using DBEs that provide only a gratuitous, pass-through function.  However, this modification may present difficulties for contractors in certain market areas where material resources and DBE participation are limited.

Reciprocity of DBE Certification – The NPRM proposes to establish interstate certification for DBEs.  DBEs certified in one state (State A) will no longer have to resubmit entire applications to other states.  Rather, a DBE seeking certification in State B need only provide evidence of certification and submit a declaration of eligibility.  State B then has 10 business days to certify the firm. However, after certifying the firm, State B may conduct its own certification review and initiate decertification procedures if it finds “reasonable cause” for determining that the DBE is ineligible for certification in State B.  Note that the standard for review has been heightened from the previous “good cause” grounds to “reasonable cause.”  This modification is intended to reduce the administrative burden on the DBEs that must now file comprehensive applications in each state (or city) and which then must be approved by all entities.  While this modification serves to streamline the approval process, if a DBE is decertified and if the DOT upholds the decision upon appeal, the DBE is automatically decertified in all states. Thus, the new modifications may allow for greater business opportunities in more states; however, they also place a DBE at risk of losing all DBE business nationwide should it be decertified.

Decertification Procedural Protections – The NPRM would require the authorizing agency to “meaningfully explain” the basis for any recommendation to decertify a DBE, modify the requirements for decertification hearings, and provide additional procedures for certification appeals.

Annual Reporting – The NPRM proposes to enhance the available information of DBE directories and create a centralized database for a DBE Bidders List through the DOT.   In addition to serving as a reporting system for DBEs to identify available bids and winning bids, data are also proposed to be used for program evaluation and goal setting.

Formalizing COVID-19 Guidance – The NPRM provides for continuation of virtual on-site interviews, virtual certification and decertification hearings, and alternative notarization methods.  These modifications are intended to conserve certification agency resources.

Appeals to DOT – The NPRM reduces the time for a DBE to appeal an in-state certification denial from 90 days to 45 days and permits the DOT to summarily dismiss an appeal, at its discretion.  This modification cuts in half the DBE’s time to file an appeal, a decision which affects the DBE’s ability to become certified or maintain its certification nationwide.

Clarifies Counting after Decertification – The NPRM proposes that prime contractors would only be permitted to add work or extend a completed subcontract with a decertified DBE (that received notice of decertification after the subcontract was executed) if it obtains prior, written consent from the recipient.  This modification was proposed to address the concern that contractors in design-build contracts only commit to work with specific DBEs once they have been awarded a subcontract and then add work to an existing contract with decertified firms.  

Prompt Payment Requirements –   The NPRM requires that recipients affirmatively monitor the contractor’s compliance with subcontractor prompt payment and return-of-retainage requirements.  While this section does not mandate the specific monitoring mechanism, recipients are expected to enforce prompt payment and retainage compliance.  These requirements also flow down to all lower-tier subcontractors.   This modification was intended to address the barriers DBEs face to compete due to lack of prompt payment by taking steps to meet this challenge. 

ACDBE Modifications – The NPRM (1) adds, clarifies, and aligns the ACDBE program definitions with DBE program definitions; (2) replicates the DBE program’s small business element requirements;  (3) establishes procedures for counting ACDBE participation for firms that are decertified during the contract performance period due to exceeding the business size standard or the disadvantaged owner PNW limits; (4) clarifies goals setting and reporting requirements; and (5) seeks comment on whether to increase long-term lease agreements. 

This significant set of proposed rules offers an opportunity for many programming changes.  The comments posted to date range from supportive to critical and suggest that there still remain many questions and recommendations for improvement.  Following the close of the comment period, the DOT will consider modifications to the proposed rules.

Effective October 1, 2022, Connecticut adopted new State Building, Fire Safety, and Fire Prevention codes.  The new codes include 12 international and national model codes.  The State Building Code applies to most buildings and other structures newly-constructed, altered, added to, or undergoing a change in use.  The new codes apply to projects for which a permit is applied after the effective date. A grace period of approximately three months from the effective date may be available by applying for a code modification from the applicable office for projects significantly impacted by the code changes. Such a modification, if granted, would allow the project to continue under the 2018 codes.  If a municipality requires separate permit applications for each trade or portion of a project, then the application date for the primary permit will determine the code applicable to all permits for the project.  Additional information regarding all codes is available on the Connecticut Department of Administrative Services website.

The American Arbitration Association (AAA) has revised its Commercial Arbitration Rules and Mediation Procedures, effective September 1, 2022. The goal of these revisions is to standardize longstanding AAA practices concerning confidentiality, consideration of consolidation/joinder motions, and civility. The amendments also further promote efficiency, reflect advances in technology, and include discussion on cybersecurity concerns.  The following is a summary of the revisions:

* On confidentiality, the amended Rules codify the longstanding practice that all matters related to an arbitration, including the final award, are kept confidential. The amended Rules have further empowered arbitrators to issue confidentiality orders as needed.

* On the topic of consolidation and joinder, the AAA has made significant changes. More specifically, parties can now request the consolidation of arbitrations or joinder of additional parties. Unless all parties are in agreement, the decision to allow consolidation or joinder is left to the discretion of the arbitrator. In determining whether a request to consolidate or join may be granted, an arbitrator must consider: (1) the terms and compatibility of the agreements to arbitrate; (2) applicable law; (3) the timeliness of the request to consolidate and the progress already made in the arbitrations; (4) whether the arbitrations raise common issues of law and/or fact; and (5) whether consolidation of the arbitrations would serve the interests of justice and efficiency.

* On civility, new rule R-2 (c) requires that parties and their representatives appearing for arbitration pursuant to the AAA must conduct themselves in accordance with the AAA’s Standards of Conduct for Parties and Representatives (Standards). If a party fails to act pursuant to the Standards, the AAA may decline to further administer a particular case or case load.

* On promoting greater efficiency, the amended Rules prohibit any motion practice absent showing good cause and arbitrator permission. Discovery, other than a basic exchange of exhibits, also is prohibited.

* Reflecting on the advances in technology, the amended Rules now permit video, audio, or other electronic conference methods, in addition to the traditional, in-person conference, for each hearing. This development is most likely a result of pandemic-era success for AAA conferences.

* Regarding cybersecurity, the amended Rules include cybersecurity privacy and data protection issues as part of the checklist of topics for discussion at the preliminary hearing. Specifically, the amended Rules ask that discussion regarding the appropriate level of security and compliance in connection with the proceeding pursuant to the AAA is had at the preliminary hearing.

* Lastly, the Rules include the adjustment in the amount-in-controversy requirements for several types of arbitrations. Specifically, claims of up to $100,000, rather than the previous $75,000, may now qualify for expedited arbitration, allowing for a greater number of cases to utilize the expedited arbitration process. The amount-in-controversy requirement for the large, complex case track has doubled to $1 million. For a large, complex case to qualify for a panel of three arbitrators, claims and counterclaims must equal or exceed $3 million, triple the previous requirement.

An often-overlooked part of contract negotiations is the language included in the performance bond.  While the owner or contractor (bond obligee) requires a performance bond and pays for it, negotiating efforts are typically spent on the main contract language itself rather than the bond.  A common go-to performance bond form used in the construction industry is the AIA A312-2010 (A312).  If the bond obligee fails to make a simple change to the A312 form language, it can end up costing the bond obligee far more later when it seeks to enforce the bond and the surety declines coverage.

The A312 includes several express conditions precedent that must be satisfied before a surety’s obligation to respond to a claim on the bond is triggered.  The conditions precedent are contained in Section 3 of the A312.  Section 3 requires the bond obligee to provide notice of its intention to declare a default, an opportunity to cure, the declaration of default, and actual termination of the subject contract.  Section 5 of the A312 identifies the surety’s response options after the bond obligee satisfies the conditions in Section 3.  Many courts have held that the failure to strictly comply with all of the A312 Section 3 requirements renders the bond null and void and completely discharges the surety from all obligations under the bond.  A general contractor in Massachusetts recently learned this the hard way.

In Arch Insurance Co. v. Graphic Builders, LLC, 36 F.4th 12 (1st Cir. 2022), the contractor (bond obligee) made a claim under an unmodified A312 performance bond against a window supplier and its surety to pay for the multi-million-dollar cost to correct defective windows and to get a window warranty.  The contractor declared a default, but did not terminate the window supplier’s contract on the legitimate belief that since the work was substantially complete, such an option would have been a wrongful termination under Massachusetts common law.  The Circuit Court of Appeals acknowledged the contractor’s dilemma, but enforced the termination requirement in Section 3 in the A312 and affirmed the district court’s entry of summary judgment discharging the surety from liability on the bond.  The Court simply enforced the language in the bond to which the contractor had agreed.  As a result of not modifying the A312, the contractor was stuck not only with the cost of the bond and the window repair costs, but also significant legal fees to arrive at this court decision.

It is not uncommon for a claim against a performance bond to be asserted at the end of a project, after a party to the contract learns something went wrong and needs to be fixed.  To avoid the fate of the contractor in Graphic Builders, a bond obligee should remove the termination requirement in section 3.2 of the A312 (and from any other performance bond containing similar language), while negotiating the overall contract, to limit the final condition precedent in the bond to the declaration of a contractor default.  The bond obligee should not have to terminate the contract before the surety’s obligations are triggered and deal with the other potential issues that might accompany such an action late in a project.  Notice to the surety and principal that the bond obligee is considering declaring a default, providing an opportunity to cure, and a declaration of default should be all that is necessary before the bond obligee is entitled to the benefits of the performance bond for which it has paid.