Modifying the Contract of Surety

Before beginning work on a construction project, contractors are frequently required to obtain a surety bond that will ensure the completion of the contractor's duties under the contract. This requirement is typically outlined in the construction contract. However, the parties can expressly agree to waive such provision. Additionally, the owner can waive the necessity for the bond by implication either through his words or actions. For example, consider the owner who demands that the contractor begin work on a given date, even though the contractor had not presented the owner with a surety bond by that date. The owner's later refusal to waive the bond provision would be ineffectual as his action in demanding the start of construction prior to receiving the bond already constituted a waiver.

Once the contractor obtains a surety bond, he becomes the surety's principal with his performance under the contract being guaranteed by the surety. Thus, once the contractor satisfactorily completes his work on the project, the surety is discharged from liability on the bond. Likewise, if the owner materially modifies the construction contract from that originally contemplated by the parties, the nonconsenting surety will be discharged from liability. A "material" change to the contract includes one that increases the surety's chance of incurring a loss on the bond.

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