RAY BELL CONSTRUCTION COMPANY, INC. v. STATE OF TENNESSEE, TENNESSEE DEPARTMENT OF TRANSPORTATION (Tenn. December 12, 2011)
A construction company entered into a contract with the State of Tennessee to restructure an interstate interchange. The contract provides that the contract completion date "may be extended in accordance with the Standard Specifications, however, no incentive payment will be made if work is not completed in its entirety by December 15, 2006."
The Claims Commission found that the contract contained a latent ambiguity requiring extrinsic evidence to interpret the contract. The Claims Commission considered extrinsic evidence and concluded that the construction company was entitled to the maximum incentive payment and an extension of the contract completion date. A divided Court of Appeals affirmed the judgment of the Claims Commission. We hold that the contract is unambiguous and does not permit an extension of the incentive date. Accordingly, we reverse the Court of Appeals and remand to the Claims Commission for modification of the final judgment.
Opinion available at:
http://www.tba2.org/tba_files/TSC/2011/raybell_121211.pdf
December 27, 2011
December 22, 2011
Court reviews whether a contractor breached its contract to construct a parking lot
FILMtech, Inc., v. CHARLIE McANALLY, d/b/a GRAINGER PAVING (Tenn. Ct. App. December 21, 2011)
Plaintiff brought this action against this contractor alleging breach of contract to construct an asphalt parking lot for plaintiff. The Trial Court determined that defendant breached the contract and awarded damages. On appeal, we affirm the Judgment of the Trial Court.
Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/filmtech_122211.pdf
Plaintiff brought this action against this contractor alleging breach of contract to construct an asphalt parking lot for plaintiff. The Trial Court determined that defendant breached the contract and awarded damages. On appeal, we affirm the Judgment of the Trial Court.
Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/filmtech_122211.pdf
December 21, 2011
Court reviews whether a purchaser of real estate effectively exercised its right to terminate a contract.
CAMERON GENERAL CONTRACTORS, INC. v. KINGSTON PIKE, LLC (Tenn. Ct. App. December 21, 2011)
Cameron General Contractors, Inc., a Nebraska corporation ("Cameron"), sued Kingston Pike, LLC, a Georgia limited liability company ("Kingston Pike"), for breach of a contract concerning the sale of real property located in Knoxville, Tennessee. Prior to trial, Cameron elected to exercise its contractual right to terminate the contract, and the case proceeded to trial on the issue of damages.
After a bench trial, the Trial Court entered its order finding and holding, inter alia, that the contract did not limit Cameron to the return of its earnest money, and granting Cameron a judgment against Kingston Pike for damages in the amount of $872,418.22, plus attorney's fees of $137,656.56. Kingston Pike appeals to this Court.
We find and hold that the contract at issue clearly and unambiguously provides that once Cameron chose to terminate the contract, Cameron's sole remedy for Kingston Pike's breach was a return of Cameron's earnest money deposit. We, therefore, reverse the Trial Court's October 28, 2010 order.
Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/cameron_122111.pdf
Cameron General Contractors, Inc., a Nebraska corporation ("Cameron"), sued Kingston Pike, LLC, a Georgia limited liability company ("Kingston Pike"), for breach of a contract concerning the sale of real property located in Knoxville, Tennessee. Prior to trial, Cameron elected to exercise its contractual right to terminate the contract, and the case proceeded to trial on the issue of damages.
After a bench trial, the Trial Court entered its order finding and holding, inter alia, that the contract did not limit Cameron to the return of its earnest money, and granting Cameron a judgment against Kingston Pike for damages in the amount of $872,418.22, plus attorney's fees of $137,656.56. Kingston Pike appeals to this Court.
We find and hold that the contract at issue clearly and unambiguously provides that once Cameron chose to terminate the contract, Cameron's sole remedy for Kingston Pike's breach was a return of Cameron's earnest money deposit. We, therefore, reverse the Trial Court's October 28, 2010 order.
Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/cameron_122111.pdf
December 14, 2011
Court reviews whether the principal of an LLC authorized advances and pledgings of collateral.
REGIONS BANK v. BRIC CONSTRUCTORS, LLC, F/K/A BRIC CONTRACTORS, LLC, AND PATRICIA MCINTOSH (Tenn. Ct. App. December 14, 2011)
This is an action to collect a debt and to recover collateral. The defendant LLC obtained a line of credit from the plaintiff bank. The LLC borrowed against the line of credit to purchase certain property, and the property was pledged as collateral.
Several months later, the line of credit was converted into a fixed amount loan over a longer term, and a new security agreement was executed pledging the same collateral. On the same day, the LLC obtained another line of credit secured by the LLC's accounts receivable. The next day, the LLC took an advance on the new line of credit.
The LLC made monthly payments on both obligations for almost a year, and then it defaulted. The plaintiff bank filed this lawsuit against the LLC and its principal to collect on the loans and to recover the collateral. The LLC contended that the principal of the LLC did not sign key documents, did not authorize advances, and did not authorize the pledge of the collateral.
After a bench trial, the trial court held in favor of the bank based on, among other things, its finding that the principal of the LLC had ratified any allegedly unauthorized advances made under the lines of credit. The defendants now appeal. We reverse the finding of ratification as to one advance and remand for further findings; in all other respects, the decision of the trial court is affirmed.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/regionsbank_121411.pdf
This is an action to collect a debt and to recover collateral. The defendant LLC obtained a line of credit from the plaintiff bank. The LLC borrowed against the line of credit to purchase certain property, and the property was pledged as collateral.
Several months later, the line of credit was converted into a fixed amount loan over a longer term, and a new security agreement was executed pledging the same collateral. On the same day, the LLC obtained another line of credit secured by the LLC's accounts receivable. The next day, the LLC took an advance on the new line of credit.
The LLC made monthly payments on both obligations for almost a year, and then it defaulted. The plaintiff bank filed this lawsuit against the LLC and its principal to collect on the loans and to recover the collateral. The LLC contended that the principal of the LLC did not sign key documents, did not authorize advances, and did not authorize the pledge of the collateral.
After a bench trial, the trial court held in favor of the bank based on, among other things, its finding that the principal of the LLC had ratified any allegedly unauthorized advances made under the lines of credit. The defendants now appeal. We reverse the finding of ratification as to one advance and remand for further findings; in all other respects, the decision of the trial court is affirmed.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/regionsbank_121411.pdf
November 03, 2011
Court: Contractors liable for what their subs do (Jackson Sun)
A ruling from the Tennessee Supreme Court last week made it easier for homeowners to hold contractors responsible for shoddy work by subcontractors. The court has found that contractors have a duty to perform services in a "careful, skillful, diligent and workmanlike manner" that can't be fully delegated to another contractor they hire.
Read more about the issues that led up to the decision in the Tennessee Bar Journal.
The Jackson Sun carried this AP story
Read more about the issues that led up to the decision in the Tennessee Bar Journal.
The Jackson Sun carried this AP story
State Supreme Court ruling finds liability for contractors using subs
A ruling from the Tennessee Supreme Court has made it easier for homeowners to hold contractors responsible for shoddy work by subcontractors.
The court has found that contractors have a duty to perform services in a “careful, skillful, diligent and workmanlike manner” that can’t be fully delegated to another contractor they hire.
The 5-0 ruling in a case from Chattanooga over a botched roof repair job that caused a fire could have broad implications for homeowners and contractors because most home construction and repair work involves bringing in subcontractors to handle parts of the job.
The opinion written by Justice Gary Wade and released last week said this was the first time the state Supreme Court had taken up the issue of whether a contractor was absolved from liability under the contract by hiring a subcontractor.
The case began when Robert and Joanie Emerson signed a contract with Winters Roofing Co. to replace a roof. Company owner Martin Winters subcontracted out the work. When the Emersons complained that the new roof leaked, Winters brought in a different subcontractor for repairs.
The subcontractor used a propane torch on the roof, and a few hours later the house caught fire. A fire investigator for the insurance company concluded the open flame roofing work started the fire, which caused more than $870,000 in damages to the home on Sept. 26, 2007.
Neither Winters nor the subcontractor had liability insurance, although Winters tried to obtain it the day after the fire and then filed a claim that said the fire happened seven days later, the ruling said.
The Emersons’ insurance company sued Winters, who argued that he wasn’t at the site while the subcontractor was working and wasn’t responsible for his mistakes.
The trial court dismissed the lawsuit, saying the couple’s insurance company couldn’t recover damages because the fire wasn’t a foreseeable part of the contract. It also said that the only way Winters could be held responsible was if it was shown that he was negligent in his hiring or supervision of the subcontractor.
Last year the Tennessee Court of Appeals overturned that decision.
“The defendant had an implied duty to perform the services required by his contract with the Emersons in a careful, skillful, diligent, and workmanlike manner,” the Supreme Court ruling says.
It concluded that while Winters had lawfully delegated his responsibility to install a proper roof to the subcontractors, he still was liable for the shoddy work.
http://www.jacksonsun.com/article/20111030/NEWS01/111030004/State-Supreme-Court-ruling-finds-liability-contractors-using-subs-
The court has found that contractors have a duty to perform services in a “careful, skillful, diligent and workmanlike manner” that can’t be fully delegated to another contractor they hire.
The 5-0 ruling in a case from Chattanooga over a botched roof repair job that caused a fire could have broad implications for homeowners and contractors because most home construction and repair work involves bringing in subcontractors to handle parts of the job.
The opinion written by Justice Gary Wade and released last week said this was the first time the state Supreme Court had taken up the issue of whether a contractor was absolved from liability under the contract by hiring a subcontractor.
The case began when Robert and Joanie Emerson signed a contract with Winters Roofing Co. to replace a roof. Company owner Martin Winters subcontracted out the work. When the Emersons complained that the new roof leaked, Winters brought in a different subcontractor for repairs.
The subcontractor used a propane torch on the roof, and a few hours later the house caught fire. A fire investigator for the insurance company concluded the open flame roofing work started the fire, which caused more than $870,000 in damages to the home on Sept. 26, 2007.
Neither Winters nor the subcontractor had liability insurance, although Winters tried to obtain it the day after the fire and then filed a claim that said the fire happened seven days later, the ruling said.
The Emersons’ insurance company sued Winters, who argued that he wasn’t at the site while the subcontractor was working and wasn’t responsible for his mistakes.
The trial court dismissed the lawsuit, saying the couple’s insurance company couldn’t recover damages because the fire wasn’t a foreseeable part of the contract. It also said that the only way Winters could be held responsible was if it was shown that he was negligent in his hiring or supervision of the subcontractor.
Last year the Tennessee Court of Appeals overturned that decision.
“The defendant had an implied duty to perform the services required by his contract with the Emersons in a careful, skillful, diligent, and workmanlike manner,” the Supreme Court ruling says.
It concluded that while Winters had lawfully delegated his responsibility to install a proper roof to the subcontractors, he still was liable for the shoddy work.
http://www.jacksonsun.com/article/20111030/NEWS01/111030004/State-Supreme-Court-ruling-finds-liability-contractors-using-subs-
TN Supreme Court whether a contractor can be held liable for damage caused by an independent subcontractor.
FEDERAL INSURANCE COMPANY A/S/O ROBERT AND JOANIE EMERSON v. MARTIN EDWARD WINTERS, D/B/A WINTERS ROOFING COMPANY (Tenn. October 24, 2011)
The defendant contractor entered into a contract to replace a roof. When the newly installed roof developed leaks, the defendant hired an independent contractor to make the necessary repairs. While performing the work, the independent contractor caused a fire, resulting in an $871,069.73 insurance claim by the homeowners. As subrogor to the homeowners' rights and claims arising out of the fire, the plaintiff insurance company sued the defendant in both tort and in contract. The defendant filed a motion for summary judgment, asserting that because he had subcontracted the work, he could not be liable. The trial court granted the motion on both the negligence and breach of contract claims.
The Court of Appeals reversed, holding that the defendant had a non-delegable contractual duty to perform the roofing services in a careful, skillful, and workmanlike manner. This Court granted the defendant's application for permission to appeal in order to determine the propriety of the claim under the theory of contract. Because the defendant had an implied non-delegable duty to install the roof in a careful, skillful, diligent, and workmanlike manner, the judgment of the Court of Appeals is affirmed. The case is remanded to the trial court for proceedings consistent with this opinion.
Opinion available at:
http://www.tba2.org/tba_files/TSC/2011/federalinsurance_102411.pdf
The defendant contractor entered into a contract to replace a roof. When the newly installed roof developed leaks, the defendant hired an independent contractor to make the necessary repairs. While performing the work, the independent contractor caused a fire, resulting in an $871,069.73 insurance claim by the homeowners. As subrogor to the homeowners' rights and claims arising out of the fire, the plaintiff insurance company sued the defendant in both tort and in contract. The defendant filed a motion for summary judgment, asserting that because he had subcontracted the work, he could not be liable. The trial court granted the motion on both the negligence and breach of contract claims.
The Court of Appeals reversed, holding that the defendant had a non-delegable contractual duty to perform the roofing services in a careful, skillful, and workmanlike manner. This Court granted the defendant's application for permission to appeal in order to determine the propriety of the claim under the theory of contract. Because the defendant had an implied non-delegable duty to install the roof in a careful, skillful, diligent, and workmanlike manner, the judgment of the Court of Appeals is affirmed. The case is remanded to the trial court for proceedings consistent with this opinion.
Opinion available at:
http://www.tba2.org/tba_files/TSC/2011/federalinsurance_102411.pdf
November 01, 2011
New Government Crackdown On Independent Contractors Coincides with IRS Offer to Come Clean
The IRS has launched a new program that will enable many employers to resolve past worker classification issues at a relatively low tax cost by voluntarily reclassifying their workers.
This new program offers employers an opportunity to come into compliance by making a payment covering past payroll tax obligations.
This IRS "Fresh Start" initiative coincides with another new government Department of Labor program to crack down on employers who misclassify employees as independent contractors (see right-hand box for more information).
The new IRS Voluntary Classification Settlement Program "is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government," according to the IRS.
See full article at: http://www.maloneynovotny.com/news-resources/latest-news/2011/100311.html
This new program offers employers an opportunity to come into compliance by making a payment covering past payroll tax obligations.
This IRS "Fresh Start" initiative coincides with another new government Department of Labor program to crack down on employers who misclassify employees as independent contractors (see right-hand box for more information).
The new IRS Voluntary Classification Settlement Program "is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government," according to the IRS.
See full article at: http://www.maloneynovotny.com/news-resources/latest-news/2011/100311.html
October 25, 2011
Court reviews the foreseeability of plaintiff's harm and the possible liability of a condominium complex
MARQUETTE WEAVER v. FOUR MAPLES HOMEOWNERS ASSOCIATION and WESTWOOD MANAGEMENT CORPORATION (Tenn. Ct. App. October 25, 2011)
This is a premises liability case in which the Plaintiff/Appellant, a resident of Defendants/Appellees' condominium complex, was assaulted by unknown individuals. Appellant filed suit, asserting negligence on the part of Appellees in failing to timely repair a vehicle access gate on the property.
The trial court granted summary judgment to Appellees, finding that Appellees owed no duty to Appellant as the harm was not reasonably foreseeable. We conclude that the evidence creates a dispute as to whether the underlying assault was foreseeable and, therefore, the grant of summary judgment was erroneous. Reversed and remanded.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/weaverm_102511.pdf
This is a premises liability case in which the Plaintiff/Appellant, a resident of Defendants/Appellees' condominium complex, was assaulted by unknown individuals. Appellant filed suit, asserting negligence on the part of Appellees in failing to timely repair a vehicle access gate on the property.
The trial court granted summary judgment to Appellees, finding that Appellees owed no duty to Appellant as the harm was not reasonably foreseeable. We conclude that the evidence creates a dispute as to whether the underlying assault was foreseeable and, therefore, the grant of summary judgment was erroneous. Reversed and remanded.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/weaverm_102511.pdf
October 13, 2011
Court reviews whether the seller of a home should indemnify the builder for damages relating to a breach of contract dispute
TRIANGLE AMERICAN HOMES v. SAMUEL B. HARRISON, ET AL. (Tenn. Ct. App. October 13, 2011)
In this indemnity case, Jere Krieg ("Builder"), through Triangle American Homes, Inc., initially filed a complaint for attachment and damages against Samuel and Lauren Harrison (collectively "the Harrisons") relating to the construction of a modular home. When the Harrisons filed a counterclaim, arguing that Builder had failed to perform pursuant to their contract, Builder brought a third-party complaint against All American Homes of Tennessee, LLC ("Seller"), alleging that Seller should indemnify Builder.
Builder and the Harrisons entered into a settlement agreement. In the remaining suit for indemnification, Seller argued that Builder was not entitled to indemnity because the damages and losses sustained by Builder were a result of Builder's actions. Following a bench trial, the trial court held that Builder was entitled to damages in the amount of $45,000 and attorney fees in the amount of $45,000, for a total award of $90,000. Seller appeals. We modify the award of attorney fees to $18,084 and affirm the decision of the trial court in all other respects.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/triangle_101311.pdf
In this indemnity case, Jere Krieg ("Builder"), through Triangle American Homes, Inc., initially filed a complaint for attachment and damages against Samuel and Lauren Harrison (collectively "the Harrisons") relating to the construction of a modular home. When the Harrisons filed a counterclaim, arguing that Builder had failed to perform pursuant to their contract, Builder brought a third-party complaint against All American Homes of Tennessee, LLC ("Seller"), alleging that Seller should indemnify Builder.
Builder and the Harrisons entered into a settlement agreement. In the remaining suit for indemnification, Seller argued that Builder was not entitled to indemnity because the damages and losses sustained by Builder were a result of Builder's actions. Following a bench trial, the trial court held that Builder was entitled to damages in the amount of $45,000 and attorney fees in the amount of $45,000, for a total award of $90,000. Seller appeals. We modify the award of attorney fees to $18,084 and affirm the decision of the trial court in all other respects.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/triangle_101311.pdf
September 27, 2011
Court reviews a breach of contract dispute involving the paving of a drag strip
NORTHWEST TENNESSEE MOTORSPORTS PARK, LLC v. TENNESSEE ASPHALT COMPANY (Tenn. Ct. App. September 23, 2011)
This is a breach of contract case. Appellants contracted with Appellees to pave their existing drag strip. Because the soil under the drag strip contained too much moisture, the paving project failed and other parts of the drag strip not included in the contract were damaged. The trial court awarded damages for the Appellant, but later reduced the damages by the amount over and above the original contract. Appellant appeals. Because the Appellant failed to present any evidence that Appellee breached the contract, we reverse and remand.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/northwest_092311.pdf
This is a breach of contract case. Appellants contracted with Appellees to pave their existing drag strip. Because the soil under the drag strip contained too much moisture, the paving project failed and other parts of the drag strip not included in the contract were damaged. The trial court awarded damages for the Appellant, but later reduced the damages by the amount over and above the original contract. Appellant appeals. Because the Appellant failed to present any evidence that Appellee breached the contract, we reverse and remand.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/northwest_092311.pdf
September 12, 2011
Guest Post: Tennessee surety bond basics for contractors
Tennessee surety bond basics for contractors
Danielle Rodabaugh, Surety Bonds Insider
The understanding most contractors have of surety bond legalities typically doesn't go much further than the fact that they have to buy bonds before beginning projects. Unfortunately, all too often contractors only really learn about surety bonds after a claim has been made and they're in the the midst of a lawsuit. This article will explore some key legal points that local contractors should know about Tennessee surety bonds.
Surety bonds are not insurance policies. Although insurance companies almost always underwrite surety bonds, they do not function in the same way. Insurance agents expect claims to be made against insurance policies. Conversely, surety providers do not expect claims to be made against bonds, and, if they are, the surety expects the contractor to pay for costs.
Surety bonds are risk mitigation tools that are used to reduce instances of fraud and malpractice across a number of different industries. In the construction industry, surety bonds are also called "contract bonds" or "construction bonds." Government agencies require the use of specific construction bonds that vary depending on the project type and its geographic location. Common ones include bid bonds, performance bonds and payment bonds, just to name a few. No matter the specific bond title, though, they all work in the same basic way.
Each surety bond that's issued essentially functions as a legally binding contract that joins three entities together.
If a principal fails to meet the bond's terms, then the obligee can make a claim on the bond to gain reparation. If the claim is found to be valid, the surety will be held responsible for paying the claim. The surety then expects the principal to repay the agency for all costs, which is a major distinction between surety bonds and insurance policies.
Generally speaking, contractor bonding provides legal protection to government agencies and other project owners who fund a construction project. Most contract bonds are required in case a contractor leaves a project incomplete or does unsatisfactory work, in which case the obligee can make a claim on the bond. Who exactly receives the bond's financial protection, though, depends on the bond's language. For instance, payment bonds actually protect subcontractors and material suppliers by guaranteeing they will be paid for their services.
A number of different laws regulate the use of surety bonds in Tennessee. For starters, the federal Miller Act requires the use of separate payment and performance bonds on every publicly funded project that's contracted for $100,000 or more. The Tennessee Board for Licensing Contractors does not require construction professionals to post a surety bond to get a contractor's license, however, surety bonds can be required for bidding or obtaining contractor permits from local government agencies in the state. Exact contract bond requirements vary by jurisdiction, so contractors should check with the government agency that enforces local construction regulations before beginning any project.
To get a home improvement contractor license in Tennessee, applicants must provide original proof of $10,000 worth of financial responsibility via either a 1) surety bond with written power of attorney attached, 2) cash bond, 3) property bond or 4) irrevocable letter of credit.
The first step to getting a surety bond is to find a surety provider that best meets the company's needs. The surety industry's leading providers offer online services to help Tennessee contractors get the surety bonds they need as quickly and easily as possible. Contractors can fill out online applications in just a few minutes.
Surety providers will conduct a thorough background check to decide whether an applicant qualifies for a contract bond. This typically involves an examination of the applicant's financial history, credit score and work record. If a business shows signs of financial instability or poor performance, the surety provider will simply refuse to issue the bond. If a contractor fails to secure the necessary bond(s), the business will not be able to legally work on the project. Ignoring surety regulations can result in heavy fines, legal action and license revocations.
Once a business secures the bond, it makes a legally binding promise to fulfill the bond's contractual language. This typically means the contractor agrees to finish the project at hand according to contract.
Although it might seem complicated, the goal of the surety bond process is twofold:
Since surety bonds play such an important role in Tennessee's construction industry, a basic understanding of their functionality can help contractors undergo the process much more easily.
Danielle Rodabaugh is the editor of the Surety Bonds Insider, a publication that provides in-depth analyses of developments within the surety industry. The publication is sponsored by SuretyBonds.com, a nationwide surety bond producer that helps contractors and their lawyers understand the legal implications of the surety bond process.
Danielle Rodabaugh, Surety Bonds Insider
The understanding most contractors have of surety bond legalities typically doesn't go much further than the fact that they have to buy bonds before beginning projects. Unfortunately, all too often contractors only really learn about surety bonds after a claim has been made and they're in the the midst of a lawsuit. This article will explore some key legal points that local contractors should know about Tennessee surety bonds.
What exactly are surety bonds?
Surety bonds are not insurance policies. Although insurance companies almost always underwrite surety bonds, they do not function in the same way. Insurance agents expect claims to be made against insurance policies. Conversely, surety providers do not expect claims to be made against bonds, and, if they are, the surety expects the contractor to pay for costs.
Surety bonds are risk mitigation tools that are used to reduce instances of fraud and malpractice across a number of different industries. In the construction industry, surety bonds are also called "contract bonds" or "construction bonds." Government agencies require the use of specific construction bonds that vary depending on the project type and its geographic location. Common ones include bid bonds, performance bonds and payment bonds, just to name a few. No matter the specific bond title, though, they all work in the same basic way.
How do surety bonds work?
Each surety bond that's issued essentially functions as a legally binding contract that joins three entities together.
- The principal is the contractor or construction firm that purchases the bond to guarantee the quality of future work.
- The obligee is the government agency or other project owner that requires the bond to protect against financial loss.
- The surety is the agency that executes the bond and acts as an intermediary between the principal and obligee.
If a principal fails to meet the bond's terms, then the obligee can make a claim on the bond to gain reparation. If the claim is found to be valid, the surety will be held responsible for paying the claim. The surety then expects the principal to repay the agency for all costs, which is a major distinction between surety bonds and insurance policies.
Who benefits from surety bond protection?
Generally speaking, contractor bonding provides legal protection to government agencies and other project owners who fund a construction project. Most contract bonds are required in case a contractor leaves a project incomplete or does unsatisfactory work, in which case the obligee can make a claim on the bond. Who exactly receives the bond's financial protection, though, depends on the bond's language. For instance, payment bonds actually protect subcontractors and material suppliers by guaranteeing they will be paid for their services.
Which laws require contract bonds in Tennessee?
A number of different laws regulate the use of surety bonds in Tennessee. For starters, the federal Miller Act requires the use of separate payment and performance bonds on every publicly funded project that's contracted for $100,000 or more. The Tennessee Board for Licensing Contractors does not require construction professionals to post a surety bond to get a contractor's license, however, surety bonds can be required for bidding or obtaining contractor permits from local government agencies in the state. Exact contract bond requirements vary by jurisdiction, so contractors should check with the government agency that enforces local construction regulations before beginning any project.
Surety bonds and the Tennessee home improvement contractor license
To get a home improvement contractor license in Tennessee, applicants must provide original proof of $10,000 worth of financial responsibility via either a 1) surety bond with written power of attorney attached, 2) cash bond, 3) property bond or 4) irrevocable letter of credit.
How do contractors get a Tennessee surety bond?
The first step to getting a surety bond is to find a surety provider that best meets the company's needs. The surety industry's leading providers offer online services to help Tennessee contractors get the surety bonds they need as quickly and easily as possible. Contractors can fill out online applications in just a few minutes.
Surety providers will conduct a thorough background check to decide whether an applicant qualifies for a contract bond. This typically involves an examination of the applicant's financial history, credit score and work record. If a business shows signs of financial instability or poor performance, the surety provider will simply refuse to issue the bond. If a contractor fails to secure the necessary bond(s), the business will not be able to legally work on the project. Ignoring surety regulations can result in heavy fines, legal action and license revocations.
Once a business secures the bond, it makes a legally binding promise to fulfill the bond's contractual language. This typically means the contractor agrees to finish the project at hand according to contract.
Although it might seem complicated, the goal of the surety bond process is twofold:
- keep financially unstable or otherwise unqualified construction professionals from working in the market
- protect government agencies, project owners and consumers from financial loss
Since surety bonds play such an important role in Tennessee's construction industry, a basic understanding of their functionality can help contractors undergo the process much more easily.
Danielle Rodabaugh is the editor of the Surety Bonds Insider, a publication that provides in-depth analyses of developments within the surety industry. The publication is sponsored by SuretyBonds.com, a nationwide surety bond producer that helps contractors and their lawyers understand the legal implications of the surety bond process.
September 10, 2011
TN Supreme Court considers home repair case
September 4, 2011
The Tennessee Supreme Court heard oral arguments last week on a case that could change a homeowner's ability to recover damages when a subcontractor botches a home repair or remodeling job. The case involves a Hamilton County couple whose house was destroyed by a fire while someone was fixing their roof. If the court finds in favor of the owner of the roofing company homeowners are going to have to be more vigilant, Nashville attorney John Day said. Day also wrote about the case in a recent Tennessee Bar Journal column.
Read the full story on the Tennessean's website.
The Tennessee Supreme Court heard oral arguments last week on a case that could change a homeowner's ability to recover damages when a subcontractor botches a home repair or remodeling job. The case involves a Hamilton County couple whose house was destroyed by a fire while someone was fixing their roof. If the court finds in favor of the owner of the roofing company homeowners are going to have to be more vigilant, Nashville attorney John Day said. Day also wrote about the case in a recent Tennessee Bar Journal column.
Read the full story on the Tennessean's website.
September 08, 2011
Tennessee High Court hears Botched Home Repair Case
September 3, 2011
The Tennessee Supreme Court is considering a case that could change a homeowner's ability to recover damages when a subcontractor botches a home repair or remodeling job.
The case involves a Hamilton County couple whose house was destroyed by a fire while someone was fixing their roof.
The Tennessee Supreme Court heard oral arguments in the case Thursday.
Robert and Joanie Emerson hired a company to repair their roof but, unbeknownst to them, the firm subcontracted the job out to someone else. The Emersons accuse the subcontractor of setting the house on fire while using a propane torch during the repairs.
The damage amounted to more than $800,000.
Because repair and construction work is often subcontracted out to cheap laborers who lack insurance, some legal experts say a decision in favor of the general contractor could leave many homeowners saddled with the costs for botched repair jobs.
The full article is located at: http://www.expertwitnessinconstruction.com/httpdocs/news-Botched_Home_Repair.php
The Tennessee Supreme Court is considering a case that could change a homeowner's ability to recover damages when a subcontractor botches a home repair or remodeling job.
The case involves a Hamilton County couple whose house was destroyed by a fire while someone was fixing their roof.
The Tennessee Supreme Court heard oral arguments in the case Thursday.
Robert and Joanie Emerson hired a company to repair their roof but, unbeknownst to them, the firm subcontracted the job out to someone else. The Emersons accuse the subcontractor of setting the house on fire while using a propane torch during the repairs.
The damage amounted to more than $800,000.
Because repair and construction work is often subcontracted out to cheap laborers who lack insurance, some legal experts say a decision in favor of the general contractor could leave many homeowners saddled with the costs for botched repair jobs.
The full article is located at: http://www.expertwitnessinconstruction.com/httpdocs/news-Botched_Home_Repair.php
September 01, 2011
Court reviews a case involving a breach of implied warranty dispute over unimproved real property
JERRY ANN WINN v. WELCH FARM, LLC, ET AL. (Tenn. Ct. App. September 1, 2011)
The buyer of unimproved real property sued the sellers for breach of implied warranties, imposition of a permanent nuisance, and diminution in value of the property; buyer also sought damages for alleged violations of the Tennessee Real Estate Broker License Act, the duty of good faith and fair dealing, the Tennessee Consumer Protection Act, and negligence.
The trial court held that Tennessee does not provide a cause of action for breach of implied warranty in the sale of unimproved real property; the court also held that buyer had not demonstrated a genuine issue of material fact as to whether the lot was "unbuildable." The court granted summary judgment to the defendants, and the buyer appealed. Buyer asserts that the sellers had a duty to disclose "possible adverse soil conditions." She also urges this Court to adopt a cause of action for breach of implied warranty of suitability for residential construction. We affirm the judgment of the trial court.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/winnj_090111.pdf
The buyer of unimproved real property sued the sellers for breach of implied warranties, imposition of a permanent nuisance, and diminution in value of the property; buyer also sought damages for alleged violations of the Tennessee Real Estate Broker License Act, the duty of good faith and fair dealing, the Tennessee Consumer Protection Act, and negligence.
The trial court held that Tennessee does not provide a cause of action for breach of implied warranty in the sale of unimproved real property; the court also held that buyer had not demonstrated a genuine issue of material fact as to whether the lot was "unbuildable." The court granted summary judgment to the defendants, and the buyer appealed. Buyer asserts that the sellers had a duty to disclose "possible adverse soil conditions." She also urges this Court to adopt a cause of action for breach of implied warranty of suitability for residential construction. We affirm the judgment of the trial court.
Opinion available at:
http://www.tba2.org/tba_files/TCA/2011/winnj_090111.pdf
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