Wednesday, April 25, 2007

Michigan Public Works Bond Statute -- Strict Compliance with Notice Requirements Upheld

Michigan's Public Works Bond Statute (MCL 129.201, et seq) requires strict compliance with the first (30 day) and last (90 day) notice requirements.

In contrast to the substantial compliance standard applied to notice under Michigan's lien statute, a claimant who does not have a contract with the principal contractor must closely follow the statutory notice requirements of the Michigan Public Works Bond Statute, which require serving a written notice of furnishing within 30 days of first work on the principal contractor, and a second written notice within 90 days of last work on the principal contractor and the "governmental unit" (ie., public agency contracting for the improvement). See, MCL 129.207.

On April 17, 2007, the Michigan Court of Appeals reiterated the rule of strict construction for public bond claims, and appears to have applied it even in the case of a non-statutory bond.

In National Waterworks, Inc v International Fidelity & Surety, Ltd., 275 Mich App 256; 739 NW2d 121 (2007) [slip opinion], the Court of Appeals upheld summary disposition of the Plaintiff's payment bond claim where it failed to satisfy the notice requirements set forth in the bond. The bond in question did not require a first notice of furnishing, but did require written notice within 90 days of last work.

The Plaintiff in the case served written notice of furnishing on October 8, 2004, 6 weeks before completing its last work on November 18, 2004. The bond also required a second notice within 30 days of serving the first notice. The Plaintiff served a second notice on February 11, 2005.

Although Plaintiff appears to have complied with the second notice requirement, the Court of Appeals rejected the argument that the first notice, served before completion of the work, substantially complied with the terms of the payment. The Court of Appeals relied upon its 1982 decision in Square D Environmental Corp v Aero Mechanical, Inc, 119 Mich App 740; 326 NW2d 629 (1982), which had presented a similar set of facts and a similar rejection of substantial compliance.

Commentary: This case underscores the importance of paying close attention to the notice requirements of the Public Works Bond Statute, and the particular notice requirements which might be included in a non-statutory bond.

For more information about National Waterworks, or any other payment bond or notice issues you might have, please contact Peter Cavanaugh. Each case is different.

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