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The trial court entered judgment in favor of Whiting-Turner against surety GCNA, finding that Whiting-Turner satisfied the condition precedent in the performance bond and GCNA breached its obligations. The Colorado Court of Appeals affirmed the trial court's judgment.
Construction Performance Surety Bonds—Conditions Precedent—Balance of the Contract Price—Attorney Fees. Whiting-Turner Contracting Co. (Whiting-Turner) was the general contractor for an office building construction project (the Project). Whiting-Turner entered into an agreement with Klempco Construction (Klempco) for Klempco's construction of an anchor system at the Project's underground parking garage (the Subcontract). Klempco's work included the installation of sprayed concrete (shotcrete) to support the anchoring system. The Subcontract price was $1,785,783. Whiting-Turner required Klempco to furnish a performance bond and a payment bond. Klempco obtained the bonds from Guarantee Company of North America USA (GCNA). The bonds specified three conditions precedent that Whiting-Turner would have to satisfy to trigger GCNA's obligations as surety, one of which was to pay the balance of the contract price in accordance with the Subcontract to GCNA or a contractor selected to perform the Subcontract. The "balance of the contract price" was defined as the total amount payable by Whiting-Turner to Klempco under the Subcontract "after all proper adjustments have been made, . . . reduced by all valid and proper payments made to or on behalf of [Klempco] under the [Subcontract]." Klempco immediately fell behind schedule and stopped paying its sub-subcontractors, and directed Whiting-Turner to assume responsibility for the shotcrete installation and to work directly with two of its sub-subcontractors. Whiting-Turner sent Klempco and GCNA a letter declaring Klempco in default. Following a meeting between Whiting-Turner, Klempco, and GCNA, the Subcontract price was reduced by $553,707, which was the price of the shotcrete work to be performed by Whiting-Turner. Klempco then notified Whiting-Turner that it was demobilizing from the Project. Whiting-Turner requested advice from GCNA, but GCNA did not respond. Whiting-Turner terminated the Subcontract following Klempco's default
What Happened
Whiting-Turner, a general contractor, hired Klempco Construction to install an anchor system and sprayed concrete in an underground parking garage for an office building project. When Klempco failed to complete their work properly, Whiting-Turner had problems. Klempco had a performance bond from Guarantee Company of North America USA (GCNA), which is essentially insurance that guarantees a contractor will finish their work. When Klempco didn't fulfill their contract, Whiting-Turner tried to collect from GCNA to cover the costs of completing the work.
What the Court Decided
The court ruled in favor of Whiting-Turner and ordered GCNA to pay $798,248.93 in damages. The court found that Whiting-Turner had met all the requirements to make a claim under the performance bond, and that GCNA had breached its obligation to cover the costs when the subcontractor failed to complete the work.
Why This Matters for Workers
This case reinforces that performance bonds provide real protection on construction projects. When contractors have these bonds and fail to complete work, the bond company must pay to finish the job, which helps ensure projects continue and workers keep getting paid.
This summary was generated to explain the ruling in plain English and is not legal advice.
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