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ICSC Legal Database - CasesMonday, February 22, 1999 05:01 PM

Case Index:
00124

Citation:
American Home Assur. Co. v. Larkin Gen. Hosp.. Ltd., 593 So.2d 195 (Flat 1992).

Issue:
Whether a surety on a performance bond can be held liable for consequential delay damages caused by the

contractor's default.

Facts:
Plaintiff/owner, Larkin, entered into a contract with defendant/contractor, H Corporation, for the construction of

improvements at plaintiff's site. Defendant/surety, American, executed and issued a performance bond to

plaintiff. The construction contract required the work to be substantially completed no later than May 31, 1984.

As of May 31, 1984, the project was slightly over eighty percent complete. Plaintiff, however, did not terminate

the contract until November 23, 1985, eighteen months after the projected completion date, when a dispute

arose between plaintiff and H Corporation. Plaintiff thereupon gave American notice of the default. American

elected not to complete the project and plaintiff had the contract completed by another contractor. Plaintiff now

filed application to

confirm an arbitration award against H Corporation and American. The Circuit Court, Dade County, held, and the

 District Court of Appeal affirmed, that surety's liability to plaintiff included delay damages. American appealed.

Holding:
Reversed. A surety cannot be held liable for delay damages due to the contractor's default unless the

performance bond specifically provides coverage for delay damages. The language in the performance bond,

construed together with the purpose of the bond, clearly explains that the performance bond merely guaranteed

the completion of the construction contract and nothing more. Upon default, the terms of the performance bond



required American to step in and either complete construction or pay plaintiff the reasonable costs of

completion. American cannot be held liable for delay damages beyond the terms of the performance bond.

Publication:
Legal Update

Date:
Winter 1992

Classification 1:
Contracts

Classification 2:

Classification 3:

00124 - Legal Update - Winter 1992