607 Notice Provisions

• Jurisdiction: Arizona

Notice provisions in bonds are strictly construed by the courts.

Most bond statutes, including the Miller Act and the Little Miller Act, require that claimants not in privity with the principal give some form of notice. Under the Little Miller Act, two types of notice are required by claimants who are not in direct contract with the principal. These lower-tier Little Miller Act bond claimants must serve upon the general contractor a preliminary twenty-day notice and a ninety-day post-completion notice. A.R.S. § 34-223(A). Federal Miller Act claimants are required to provide only the ninety-day post-completion notice. 40 U.S.C.A. § 270b. The courts construe this notice provision as a condition precedent to the right to maintain a suit on the bond. Bowden v. United States ex rel. Malloy, 239 F.2d 572 (9th Cir. 1956); Maricopa Turf, Inc. v. Sunmaster, Inc., 173 Ariz. at 361 (“. . . the court has held that both written notice and its timely filing are conditions precedent to a claimant’s right to recover on the bond.”) In Arizona, the failure to use all of the language contained in the statutory preliminary notice form may cause the court to determine that the notice is invalid. MLM Constr. Co. v. Pace Corp., 172 Ariz. 226, 836 P.2d 439 (App. 1992). 

 The purpose of serving the general contractor (the principal on the bond) with preliminary notice is to put the contractor on notice of potential bond claims. If the contractor knows of those other potential claimants, then the contractor can take steps to ensure that payment flows past the subcontractor to those who have supplied labor or material. For example, the contractor could condition payment to the subcontractor upon receipt of lien and bond releases from all entities that have supplied preliminary notices. The contractor could also pay by way of joint check. See, e.g., Brown Wholesale Elec. Co. v. Beztak of Scottsdale, Inc., 163 Ariz. 340, 788 P.2d 73 (1990). By making sure that the providers of preliminary notice have been paid, the contractor and its surety can avoid late claims from parties not in privity. 

 In Norquip Rental Corp. v. Sky Steel Erectors, Inc., supra, the court first determined that a subcontractor’s bond was required under the prime contract, and therefore conditioned in accordance with the Uniform Procurement Code and the regulations adopted under it. The court then recognized that a claimant not in direct privity with the principal (the subcontractor) must provide preliminary and post-completion notice. The court nonetheless held that a claimant who was not in direct contract with the subcontractor could maintain an action against the subcontractor and its bond even though it never gave the subcontractor preliminary twenty-day notice. The court determined that the claimant’s preliminary twenty-day notice served upon the general contractor was sufficient. The court assumed that the claimant, a third-tier supplier, could not maintain an action against the general contractor or its statutory bond. (This is the federal rule. There is no Arizona case squarely deciding whether it is also the rule under Arizona’s Little Miller Act. A number of other cases do not follow the federal rule, and permit claims against the Little Miller Act bonds from suppliers of nonfirst-tier subcontractors. The issue is the subject of a current appeal, which was not decided at the time

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