In Public Projects, Subcontractors’ Payment Bond Rights Are Not Waive-able

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A recent Supreme Judicial Court decision should provide subcontractors who perform work on public projects with welcome assurance that payment bonds provide meaningful protection against non-payment. In Costa v. Brait Builders Corp., 463 Mass. 65 (2012), the SJC held squarely that a subcontractor’s rights under a statutorily required payment bond cannot be waived in a private contract between subcontractor and general contractor. Since mechanic’s liens are unavailable in public projects, we at Fitch Law Partners LLP view the security Costa affords subcontractors as important.

Costa involved the termination of a subcontractor by the general contractor after a public project in Bridgewater was underway. Among other claims asserted by the subcontractor was one for recovery against the payment bond obtained by the general contractor pursuant to G.L. c. 149, § 29, which requires a bond in public projects where the contract amount is $25,000 or more. The surety company that issued the payment bond defended the subcontractor’s claim on the ground that the subcontract waived the subcontractor’s payment bond rights.

In an appeal brought from the trial court’s entry of a directed verdict for the surety, the SJC granted the subcontractor’s application for direct appellate review on the waiver issue, and struck down the contractual waiver language as unenforceable.

In determining that the “better view” is that G.L. c. 149, § 29 “embraces a substantial public policy, precluding waiver,” the Court wrote: “We have long held that § 29 should be construed liberally to achieve the remedial purpose of providing security to subcontractors and others who supply labor or materials for public construction projects.”

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