Pay Attention to What You Sign – Terms in Contracts and Bonds Bite Back

Reading what you sign, and making sure you’re okay with it, is as important as it’s always been.  As contracts have moved from handshakes, to 1 page written documents, to long form agreements with fine print and addenda, it has become more an more difficult to actually know what any of the parties have agreed to. However, that does not affect how the courts will rule or enforce contractual provisions when the language is plain and clear.

Courts in two different states recently issued reminders to do just what the contract, bond and statutes require to be done. 

In Connecticut, the Federal Court of Appeals upheld judgment in favor of a surety and against a developer who failed to comply with at least two conditions precedent under a performance bond.  The developer was obligated to give the surety timely notice, but didn’t.  Also, the developer was obligated to pay the balance of the contract to the surety, but didn’t.  The developer had its arguments as to why those failures should be excused, but the court didn’t buy them.  The case is Stonington Water Street Associates v. National Fire Insurance Company, 2012 U.S. App. LEXIS 13891 (2nd Cir., July 9, 2012).

In Rhode Island, a vendor from Pennsylvania recorded a Rhode Island mechanics lien notice but failed to sign it under oath as required by the Rhode Island lien law.  The vendor argued that notarization of the document was tantamount to a statement under oath. The Rhode Island supreme court noted that the lien law must be followed to the letter.  GSM Industrial v. Grinnell Fire Protection Systems.