Contractors at Risk- the 1993 Amendment to Section 49-41 of the Connecticut General Statutes
| Jurisdiction | Connecticut,United States |
| Publication year | 2021 |
| Citation | Vol. 68 Pg. 285 |
| Pages | 285 |
68 CBJ 285. Contractors at Risk- The 1993 Amendment to Section 49-41 of the Connecticut General Statutes
The most recent amendment to Section 49-41 of the Connecticut General Statutes creates even greater potential for legal entanglement by the participants in public construction projects in Connecticut. (fn1) The new version of Section 49-41 (fn2) mandates a contractual requirement which places upon the contractor the burden of providing a payment bond on or before the date the public contract is awarded. Requiring the contractor to supply the payment bond is neither objectionable nor problematic. Problems arise when the payment bond is not provided by the contractor and the public owner fails to demand the payment bond. The absence of a payment bond may result in subcontractors and suppliers not being paid for labor and materials supplied to the project. The new statute exposes the public owner and the contractor to potential liability in the event the bond is not provided to the owner, and invites litigation to overcome the effect of the absence of the bond. This article will review the history and purpose of the requirement for payment bonds on public construction projects in Connecticut and explore the difficulties which public owners, contractors, and subcontractors and suppliers (fn3) will encounter as a result of this new statute.
Section 49-41 is part of what is known as Connecticut's "Little Miller Act. " (fn4) Connecticut first adopted a statutory mechanism for the provision of payment bonds on public construction projects in 1917, in response to a Connecticut Supreme Court decision in 1909 which held that a mechanic's lien cannot be enforced against public property. (fn5) The mechanic's lien was the long recognized mechanism for securing payment for services rendered on a construction project. National Fireproofing made clear that mechanic's liens would not provide the desired security for services rendered, or materials supplied, to public construction projects in Connecticut. In 1917, in recognition of the strong public policy favoring payment of
subcontractors and suppliers and the policy against exposing public property to liens, as expressed in National Fireproofing, Connecticut followed other states and implemented a statute to require payment bonds for the benefit of subcontractors and suppliers. Under the original statute, if a subcontractor or supplier remained unpaid, a claim for payment could be made directly to the public owner. The payment bond on a public project was the equivalent of the mechanic's lien on a private project - in the event of nonpayment, there was security to guarantee payment for the value of the services or materials provided to the project.
The significance of the interrelationship between the mechanic's lien right and the right to file a claim against a statutory payment bond cannot be over emphasized. On private projects, contractors - including at least the second tier of subcontractors and suppliers (fn6) - are entitled to attach the property through a mechanic's lien for the value of the labor and/ or materials, and collect that value, through the statutory mechanism set forth in §§ 49-33 through 49-39 of the Connecticut General Statutes. Because mechanic's liens cannot be enforced on public projects, the security provided through the statutory payment bond may be the only avenue of recovery available to a provider of labor and/or materials for a public project.
The central issue underlying both the mechanic's lien and the payment bond statutes is payment. These statutory schemes provide, for private and public construction projects, avenues of recovery for monies earned but unpaid. If a contractor or subcontractor fails to remit payment to the subcontractors or suppliers, the statutory remedies may provide the sole source of recovery. (fn7) In this era of business failure and/or bankruptcy protection, vendors of labor and/or materials thus take solace in the security of mechanic's liens or payment bonds provided by statute. (fn8)
Sections 49-41a through 41c were adopted in 1969. The application of the prompt pay statute is tied directly to the requirement for a payment bond on public construction projects. (fn9) This statute is intended to provide further protection to suppliers of labor and materials to public projects. The new version of § 49-41 arguably defeats the effect of § 49-41a(a) because the new statute does not require the bond, but only requires a contractual provision to require the bond. To the extent the new version of § 49-41 defeats the protections afforded by the prompt pay statute, which have been deemed to be a separate and distinct series of protections, (fn10) section 4941
should be amended.
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