4.3.4.4.1 The Surety's Obligation Upon Obligee's Declaration of Default

• Jurisdiction: Arizona

The act of default that may permit the declaration of default generally includes the failure to timely prosecute the work, abandonment of the work, insolvency proceedings, and failure to pay for labor and materials. “To constitute a legal default, there must be a (1) material breach or series of material breaches (2) of such magnitude that the obligee is justified in terminating the contract.”^[45]

Once the project owner has declared the prime contractor in default, the surety has the obligation under the terms of its bond to conduct a reasonable investigation into the owner’s claim to determine whether a default has indeed occurred and whether the conditions of the bond...