Surety Bonds in Massachusetts Construction Projects: Payment Bonds, Performance Bonds, and What Happens When They’re Called

Massachusetts Business Attorney · Construction Law

On many construction projects, the most reliable source of payment is not the owner or the general contractor. It is the surety bond. A payment bond can put a solvent surety company behind the money owed to subcontractors and suppliers, and a performance bond can protect an owner when a contractor walks off the job. But bond rights come with strict notice requirements and short deadlines, and missing one can forfeit the claim entirely.

This guide explains how bonds work on Massachusetts public, private and federal projects, what happens when a bond is called, and what contractors sign to get bonded.

How a construction bond works

The principal is the contractor who buys the bond. The surety is the bonding company that guarantees the principal’s obligations. The obligee is the party the bond protects, usually the owner. A payment bond guarantees that the contractor will pay its subcontractors and suppliers. A performance bond guarantees that the contractor will complete the work. A bond is not insurance for the contractor: if the surety pays a claim, it will look to the contractor, and often its owners, to pay it back.

Payment bonds on Massachusetts public projects

Under G.L. c. 149, § 29, when the Commonwealth, a county, city, town, district or other public body contracts for the construction, alteration, repair or demolition of a public building or other public work, and the contract is more than $25,000, the public officials must obtain a payment bond of at least one half of the total contract price. On larger building projects, the bid laws discussed below require a bond in the full contract price.

What and who the bond covers

The § 29 bond secures payment by the general contractor and its subcontractors for labor and materials, certain specially fabricated materials, transportation charges, equipment rental, and fringe benefit contributions owed to union benefit funds (limited to 240 consecutive calendar days of labor). The statute gives enforcement rights to two groups:

• Claimants with a contract with the general contractor, such as first-tier subcontractors and suppliers who sell directly to the general.
• Claimants with a contract with a subcontractor that performs labor, or labor and materials, under a contract with the general contractor. This includes sub-subcontractors and suppliers to first-tier subcontractors, but only if they give the written notice described below.

Parties further down the chain fall outside that language. Before relying on a public bond, confirm where you sit on the project’s contract chain.

The 65-day notice for second-tier claimants

If you have no contract with the general contractor, you must give the general contractor (the “contractor principal” on the bond) written notice within 65 days after the day you last performed labor or furnished materials. The notice must state with substantial accuracy the amount claimed and the name of the party for whom the work was done or to whom materials were furnished. It must be sent by registered or certified mail to the contractor at a place where it keeps an office or conducts business, or at its residence, or served in any manner in which civil process may be served.

Specially fabricated materials have a separate, earlier deadline. To protect that part of a claim, you must notify the general contractor of the placement of the order and its amount within 20 days after receiving final written approval to use the material.

The 65-day clock runs from your last day of work, not from the date your invoice is due. Count from your last real work on the project, and send the notice early.

The one-year deadline to sue and how the claim proceeds

A claimant with a direct contract with the general contractor may enforce the bond if it has not been paid in full within 65 days after the amount was due. Every claimant must file a petition in equity within one year after the day it last performed labor or furnished materials included in the claim, and then prosecute the claim in the Superior Court. Section 29 adds several procedural protections for claimants:

• On any party’s motion, the court must advance the case for a speedy trial.
• The expedited procedures of G.L. c. 231, §§ 59 and 59B apply, and the court must enter an interlocutory decree, enforceable by execution, for any part of the claim found due under them.
• The court may not dismiss a petition because it was filed before the 65th day, but it may not enter a decree before the 70th day after the claimant’s last work.
• A decree in the claimant’s favor must include reasonable legal fees approved by the court.

Certain subcontractors on public projects also have a direct payment demand under G.L. c. 30, § 39F. Our companion article on construction payment disputes in Massachusetts covers the other ways to get paid.

Performance bonds on public projects

Public building contracts estimated to cost more than $150,000 must be bid under the procedures in G.L. c. 149, §§ 44A to 44H. The statutory general bid form in § 44E commits the selected general contractor to furnish both a performance bond and a labor and materials or payment bond, each from a surety company qualified to do business in Massachusetts and satisfactory to the awarding authority, and each in the full contract price. If the low bidder fails to sign the contract and provide the bonds, the award goes to the next lowest responsible and eligible bidder.

Filed sub-bidders can be bonded too. Under § 44F, a general bidder may request (and pay for) a performance and payment bond from a filed subcontractor in the full subcontract price. Those bonds run to the benefit of the general contractor.

Public works that are not buildings, such as roads, bridges, and water and sewer projects, are bid under G.L. c. 30, § 39M. That statute requires a bid deposit (which may be a bid bond) and requires the winning bidder to obtain the § 29 payment bond within 10 days of notice of the award. Any performance bond requirement on those projects will be in the bid documents, so read them.

Private projects: only if the contract requires a bond

No statute requires a payment or performance bond on a private project. An owner or lender may require one in the contract, and general contractors often require bonds from their larger subcontractors. If no bond exists, a subcontractor’s main security is usually the mechanic’s lien statute.

When a private payment bond does exist, G.L. c. 149, § 29A helps. If a bond is given with a written contract for work on a private building and conditions payment of all labor and material, anyone who furnishes that labor or material may sue on the bond in their own name, and need not prove they relied on it. But the claim proceeds “in accordance with its provisions,” meaning the bond’s own terms control. Standard bond forms, such as the AIA A312 payment bond, commonly require written notices within set periods after the claimant’s last work and set a deadline for suit. Get a copy of the actual bond as early as possible and calendar every deadline in it.

Bond requirements belong in contract negotiation. See our guide to contractor-focused contract review.

Federal projects in Massachusetts: the Miller Act

Massachusetts bond statutes do not govern federal construction, such as work for a federal agency or at a military installation. The Miller Act, 40 U.S.C. §§ 3131 to 3134, does. The Federal Acquisition Regulation currently requires performance and payment bonds on federal construction contracts exceeding $150,000. Under § 3133:

• A claimant that has not been paid in full within 90 days after its last labor or material may sue on the payment bond.
• A claimant with a contract with a subcontractor, but none with the prime contractor, must give the prime contractor written notice within 90 days after its last labor or material. The notice must state the amount claimed with substantial accuracy and name the party supplied, and it must be sent by a method that provides written, third-party verification of delivery, or served as a U.S. marshal may serve a summons.
• Suit must be filed no later than one year after the last labor or material, in the name of the United States, in the federal district court for the district where the contract was to be performed.
• A waiver of the right to sue on the payment bond is void unless it is in writing, signed, and made after the claimant has furnished labor or material.

Like § 29, the Miller Act stops at the second tier. The Supreme Court held in Clifford F. MacEvoy Co. v. United States that a supplier who sold to a mere supplier of the prime contractor could not recover on the bond.

What happens when a performance bond is called

A performance bond claim begins with the owner’s contract and the bond form. Owners often send “cure” letters about delays or defects, but the surety’s obligation usually depends on the owner following the bond’s conditions. Under the AIA A312 performance bond, for example, the owner must notify the contractor and the surety that it is considering declaring a default, then declare the contractor in default, terminate the contract and notify the surety, and agree to pay the remaining contract balance to the surety or to a completion contractor.

Once those conditions are met, that form gives the surety a choice of responses. It may arrange for the original contractor to finish with the owner’s consent, complete the work itself through other contractors, obtain bids and bring in a new contractor acceptable to the owner, or investigate and then pay or deny the claim. Other bond forms differ, so the actual bond controls.

For an owner, a misstep in the default process can give the surety a defense. For a contractor, a default termination can lead to an indemnity demand. Both sides should get advice before a default notice goes out.

The general indemnity agreement

Before issuing bonds, a surety typically requires the contractor to sign a general indemnity agreement, and often requires the company’s owners to sign it personally. Read it carefully. Common provisions include:

• A promise to reimburse the surety for every loss, cost and attorney’s fee it incurs on the bonds;
• The surety’s right to settle claims in its discretion, with payments made in good faith binding on the indemnitors;
• A duty to deposit collateral with the surety when it receives a claim, even before it pays anything; and
• An assignment to the surety of contract balances, equipment and other rights if the contractor defaults.

Courts have enforced these agreements as written. In Fireman’s Insurance Co. of Newark v. Todesca Equipment Co. (1st Cir. 2002), a case decided under Rhode Island law, the court affirmed a judgment requiring affiliated construction companies and individual indemnitors to reimburse their surety, where the agreement gave the surety broad discretion to pay claims. Signing personally can put your own assets behind every bond your company buys.

Bonding off a mechanic’s lien

Surety bonds also appear on private projects in a different way. Under G.L. c. 254, § 14, any person in interest may record a surety company bond in the registry of deeds, and the mechanic’s lien is dissolved when the bond is recorded. The claimant must then pursue the bond, on a short timeline. For the steps and deadlines, see our article on how to bond off a mechanic’s lien in Massachusetts.

A bond claim checklist

• At the start of every job, get a copy of any bond and identify the surety.
• Know whether the project is public, private or federal, and where you sit in the contract chain.
• Track your last day of work. Second-tier notice clocks run from that date.
• Send notices by a method the statute or bond allows, and keep proof of delivery.
• Calendar the one-year suit deadline. Negotiations do not stop it.

Frequently Asked Questions

Who has to give notice on a Massachusetts public payment bond?

A claimant with no contract with the general contractor, such as a sub-subcontractor or a supplier to a subcontractor, must give the general contractor written notice within 65 days after last performing labor or furnishing materials, by registered or certified mail or as civil process may be served. Claimants with a direct contract with the general contractor do not need this notice.

How long do I have to sue on a public payment bond in Massachusetts?

Under G.L. c. 149, § 29, the claimant must file a petition in equity within one year after the day it last performed labor or furnished materials included in the claim. The case proceeds in the Superior Court, and a successful claimant is awarded reasonable legal fees.

Are payment bonds required on private projects in Massachusetts?

No. A bond exists on a private project only if the contract requires one. If a payment bond is given, G.L. c. 149, § 29A lets anyone who furnished labor or materials sue on it, but the bond’s own notice and deadline provisions control the claim.

What are the deadlines on a federal project under the Miller Act?

A claimant with a contract with a subcontractor, but not with the prime contractor, must give the prime contractor written notice within 90 days after its last labor or material. Any suit must be filed within one year after the last labor or material, in federal district court.

If the surety pays a claim, does the contractor owe the money back?

Usually, yes. Sureties require a general indemnity agreement before issuing bonds, often signed by the company’s owners personally. Those agreements typically require the contractor and the individual signers to reimburse the surety’s losses, costs and attorney’s fees.

Getting help with a bond claim

Whether you are a subcontractor trying to get paid, an owner facing a defaulting contractor, or a contractor reviewing bond and indemnity terms, I can help you understand your rights and deadlines. Learn more about our Massachusetts business law services or contact our office at 978-273-8337.

Related Articles

• Construction payment disputes in Massachusetts
• Massachusetts mechanic’s liens: what contractors, subcontractors and property owners need to know
• How to bond off a mechanic’s lien
• Contractor-focused contract review: key issues before you sign

About the Author

Richard Alan Gaudet, Esq. is a Massachusetts attorney at the Law Offices of Richard Alan Gaudet, LLC in Middleton, Massachusetts, who advises contractors, subcontractors, suppliers and property owners on construction contracts, payment disputes and bond claims. His practice focuses on professional license defense, business law and litigation, family law, and landlord representation, serving clients across Northern, Eastern, and Central Massachusetts. Reach him at 978-273-8337 or rgaudet@gaudetlawoffice.com. Office: 35 Village Rd., Ste 100, Middleton, MA 01949.

ABOUT THIS ARTICLE

This article was prepared by a Massachusetts attorney and is provided solely for general informational and educational purposes directed to members of the general public. It does not constitute legal advice and does not create an attorney-client relationship. The law applicable to any particular situation depends on the specific facts and circumstances of that matter. Readers are encouraged to seek the advice of a licensed Massachusetts attorney before taking any action.