H 4644 Session 110 (1993-1994)
H 4644 General Bill, By R.S. Corning
A Bill to amend Chapter 5, Title 10, Code of Laws of South Carolina, 1976,
relating to construction and renovation of public buildings and other
projects, by adding Article 5 so as to provide a procedure requiring any
person entering into a formal contract with the State or any county, city, or
other political subdivision or other public authority for the construction of
a public building, for the prosecution and completion of a public work, or for
repairs upon a public building or public work to, prior to commencing the
work, execute, deliver to the public owner, and record in the public records
of the county where the improvement is located a payment and performance bond
with a surety insurer authorized to do business in this State as surety.
02/01/94 House Introduced and read first time HJ-8
02/01/94 House Referred to Committee on Judiciary HJ-8
A BILL
TO AMEND CHAPTER 5, TITLE 10, CODE OF LAWS OF SOUTH
CAROLINA, 1976, RELATING TO CONSTRUCTION AND
RENOVATION OF PUBLIC BUILDINGS AND OTHER PROJECTS,
BY ADDING ARTICLE 5 SO AS TO PROVIDE A PROCEDURE
REQUIRING ANY PERSON ENTERING INTO A FORMAL
CONTRACT WITH THE STATE OR ANY COUNTY, CITY, OR
OTHER POLITICAL SUBDIVISION OR OTHER PUBLIC
AUTHORITY FOR THE CONSTRUCTION OF A PUBLIC
BUILDING, FOR THE PROSECUTION AND COMPLETION OF A
PUBLIC WORK, OR FOR REPAIRS UPON A PUBLIC BUILDING
OR PUBLIC WORK TO, PRIOR TO COMMENCING THE WORK,
EXECUTE, DELIVER TO THE PUBLIC OWNER, AND RECORD IN
THE PUBLIC RECORDS OF THE COUNTY WHERE THE
IMPROVEMENT IS LOCATED A PAYMENT AND
PERFORMANCE BOND WITH A SURETY INSURER
AUTHORIZED TO DO BUSINESS IN THIS STATE AS SURETY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Chapter 5, Title 10 of the 1976 Code is amended by
adding:
"Article 5
Payment and Performance Bond
for Construction of Public Buildings, etc.
Section 10-5-510. (1)(a) Any person entering into a formal
contract with the State or any county, city, or political subdivision
thereof, or other public authority, for the construction of a public
building, for the prosecution and completion of a public work, or for
repairs upon a public building or public work is required, before
commencing the work, to execute, deliver to the public owner, and
record in the public records of the county where the improvement is
located, a payment and performance bond with a surety insurer
authorized to do business in this State as surety. The bond must state the
name and principal business address of both the principal and the surety
and must contain a description of the project sufficient to identify it.
The bond must be conditioned that the contractor perform the contract
in the time and manner prescribed in the contract and promptly make
payments to all persons defined in Section 10-5-520 whose claims derive
directly or indirectly from the prosecution of the work provided for in
the contract. Any claimant may apply to the governmental entity having
charge of the work for copies of the contract and bond and must
thereupon be furnished with a certified copy of the contract and bond.
The claimant shall have a right of action against the contractor and
surety for the amount due him. Such action shall not involve the public
authority in any expense. When such work is done for the State and the
contract is for $100,000 or less, no payment and performance bond shall
be required. At the discretion of the official or board awarding such
contract when such work is done for any county, city political
subdivision, or public authority, any person entering into such a contract
which is for $200,000 or less may be exempted from executing the
payment and performance bond. When such work is done for the State,
the director of the Division of General Services may delegate to state
agencies the authority to exempt any person entering into such a contract
amounting to more than $100,000 but less than $200,000 from executing
the payment and performance bond. In the event such exemption is
granted, the officer or officials are not personally liable to persons
suffering loss because of granting such exemption. The Division of
General Services shall compile an annual report that lists the number of
requests by state agencies for delegation of authority to waive the bond
requirements by agency and project number and states whether any
request for delegation was denied and the justification for the denial.
The report must be submitted no later than February first to the
Governor, the President of the Senate, and the Speaker of the House of
Representatives.
(b) The Division of General Services shall promulgate regulations
with respect to all contracts for $200,000 or less, to provide:
(1) procedures for retaining up to ten percent of each request
for payment submitted by a contractor and procedures for determining
disbursements from the amount retained on a pro rata basis to laborers,
materialmen, and subcontractors, as defined in Section 10-5-520;
(2) procedures for requiring certification from laborers,
materialmen, and subcontractors, as defined in Section 10-5-520, prior
to final payment to the contractor that such laborers, materialmen, and
subcontractors have no claims against the contractor resulting from the
completion of the work provided for in the contract.
The State shall not be held liable to any laborer, materialman, or
subcontractor for any amounts greater than the pro rata share as
determined under this section.
(2) A claimant, except a laborer, who is not in privity with the
contractor and who has not received payment for his labor, materials, or
supplies shall, within forty-five days after beginning to furnish labor,
materials, or supplies for the prosecution of the work, furnish the
contractor with a notice that he intends to look to the bond for
protection. A claimant who is not in privity with the contractor and who
has not received payment for his labor, materials, or supplies shall,
within ninety days after performance of the labor or after complete
delivery of the materials or supplies or, with respect to rental equipment,
within ninety days after the date that the rental equipment was last on the
job site available for use, deliver to the contractor and to the surety
written notice of the performance of the labor or delivery of the
materials or supplies and of the nonpayment. No action for the labor,
materials, or supplies may be instituted against the contractor or the
surety unless both notices have been given. No action shall be instituted
against the contractor or the surety on the bond after one year from the
performance of the labor or completion of delivery of the materials or
supplies. A claimant may not waive in advance his right to bring an
action under the bond against the surety. In any action brought to
enforce a claim against a payment bond under this section, the prevailing
party is entitled to recover a reasonable fee for the services of his
attorney for trial and appeal or for arbitration, in an amount to be
determined by the court, which fee must be taxed as part of his costs, as
allowed in equitable actions.
(3) The bond required in subsection (1) may be in substantially the
following form:
PUBLIC CONSTRUCTION BOND
BY THIS BOND, We , as Principal and
, a corporation, as Surety, are bound to , herein
called Owner, in the sum of $ , for payment of which we
bind ourselves, our heirs, personal representatives, successors, and
assigns, jointly, and severally.
THE CONDITION OF THIS BOND is that if Principal:
1. Performs the contract dated , 19 , between
Principal and Owner for construction of , the contract
being made a part of this bond by reference, at the times and in the
manner prescribed in the contract; and
2. Promptly makes payments to all claimants, as defined in subsection
(1) Section 10-5-510 supplying Principal with labor, materials, or
supplies, used directly or indirectly by Principal in the prosecution of the
work provided for in the contract; and
3. Pays Owner all losses, damages, expenses, costs, and attorney's
fees, including appellate proceedings, that Owner sustains because of a
default by Principal under the contract; and
4. Performs the guarantee of all work and materials furnished under
the contract for the time specified in the contract, then this bond is void;
otherwise it remains in full force.
Any changes in or under the contract documents and compliance or
noncompliance with any formalities connected with the contract or the
changes do not affect Surety's obligation under this bond.
DATED ON , 19 .
(Name of Principal)
By (As Attorney in Fact)
(Name of Surety)
(4) The payment provisions of all bonds furnished for public work
contracts described in subsection (1) must, regardless of form, be
construed and deemed statutory bond provisions, subject to all
requirements of subsection (2).
(5) Any action authorized under this section may be brought in the
county in which the public building or public work is being constructed
or repaired.
(6) All bonds executed pursuant to this section shall make reference
to this section by number and shall contain reference to the notice and
time limitation provisions of this section.
(7) In lieu of the bond required by this section, a contractor may file
with the State, county, city, or other political authority an alternative
form of security in the form of cash, a money order, a certified check, a
cashier's check, an irrevocable letter of credit, or other security of a type
approved by the Secretary of State. Any such alternative form of
security must be for the same purpose and is subject to the same
conditions as those applicable to the bond required by this section. The
determination of the value of an alternative form of security must be
made by the State, county, city, or other political subdivision as is
appropriate under the circumstances.
Section 10-5-520. As used in this article, the term:
(1) `Architect' means a person or firm that is authorized to practice
architecture pursuant to the laws of this State or a general contractor
who provides architectural services under a design-build contract.
(2) `Claim of lien' means the claim recorded as provided under the
laws of this State.
(3) `Clerk's office' means the office of the clerk of the circuit court
of the county in which the real property is located.
(4) `Commencement of the improvement' means the time of filing
for record of the notice of commencement.
(5) `Contract' means an agreement for improving real property,
written or unwritten, express or implied, and includes extras or change
orders.
(6) `Contract price' means the amount agreed upon by the
contracting parties for performing all labor and services and furnishing
all materials covered by their contract and must be increased or
diminished by the price of extras or change orders, or by any amounts
attributable to changes in the scope of the work or defects in
workmanship or materials or any other breaches of the contract; but no
penalty or liquidated damages between the owner and a contractor
diminishes the contract price as to any other lienor. If no price is agreed
upon by the contracting parties, this term means the value of all labor,
services, or materials covered by their contract, with any increases and
diminutions, as provided in this item. Allowance items are a part of the
contract when accepted by the owner.
(7) `Contractor' means a person other than a materialman or laborer
who enters into a contract with the owner of real property for improving
it, or who takes over from a contractor as so defined in the entire
remaining work under such contract. The term `contractor' includes an
architect, landscape architect, or engineer who improves real property
pursuant to a design-build contract.
(8) `Direct contract' means a contract between the owner and any
other person.
(9) `Engineer' means a person or firm that is authorized to practice
engineering pursuant to the laws of this State or a general contractor
who provides engineering services under a design-build contract.
(10) `Extras or change orders' means labor, services, or materials for
improving real property authorized by the owner and added to or deleted
from labor, services, or materials covered by a previous contract
between the same parties.
(11) `Furnish materials' means supply materials which are
incorporated in the improvement including normal wastage in
construction operations; or specially fabricated materials for
incorporation in the improvement, not including any design work,
submittals, or the like preliminary to actual fabrication of the materials;
or supply materials used for the construction and not remaining in the
improvement, subject to diminution by the salvage value of such
materials; and includes supplying tools, appliances, or machinery used
on the particular improvement to the extent of the reasonable rental
value for the period of actual use (not determinable by the contract for
rental unless the owner is a party thereto), but does not include
supplying handtools. The delivery of materials to the site of the
improvement is prima facie evidence of incorporation of such materials
in the improvement.
(12) `Improve' means build, erect, place, make, alter, remove, repair,
or demolish any improvement over, upon, connected with, or beneath
the surface of real property, or excavate any land, or furnish materials
for any of these purposes, or perform any labor or services upon the
improvements, including the furnishing of carpet or rugs or appliances
that are permanently affixed to the real property; or perform any labor
or services or furnish any materials in grading, seeding, sodding, or
planting for landscaping purposes, including the furnishing of trees,
shrubs, bushes, or plants that are planted on the real property, or in
equipping any improvement with fixtures or permanent apparatus.
(13) `Improvement' means any building, structure, construction,
demolition, excavation, landscaping, or any part thereof existing, built,
erected, placed, made, or done on land or other real property for its
permanent benefit.
(14) `Laborer' means any person other than an architect, landscape
architect, engineer, land surveyor, and the like who, under properly
authorized contract, personally performs on the site of the improvement
labor or services for improving real property and does not furnish
materials or labor service of others.
(15) `Lender' means any person who loans money to an owner for
construction of an improvement to real property, who secures that loan
by recording a mortgage on the real property, and who periodically
disburses portions of the proceeds of that loan for the payment of the
improvement.
(16) `Lienor' means a person who is a:
(a) contractor;
(b) subcontractor;
(c) sub-subcontractor;
(d) laborer;
(e) materialman who contracts with the owner, a contractor, a
subcontractor, or a sub-subcontractor; or
(f) professional lienor;
and who has a lien or prospective lien upon real property under this
article, and includes his successor in interest. No other person may have
a lien under this article.
(17) `Lienor giving notice' means any lienor, except a contractor, who
has duly and timely served a notice to the owner and, if required, to the
contractor and subcontractor.
(18) `Materialman' means any person who furnishes materials under
contract to the owner, contractor, subcontractor, or sub-subcontractor on
the site of the improvement or for direct delivery to the site of the
improvement or, for specially fabricated materials, off the site of the
improvement for the particular improvement, and who performs no labor
in the installation thereof.
(19) `Notice by lienor' means the notice to owner served as provided
under the laws of this State.
(20) `Notice of commencement' means the notice recorded as
provided under the laws of this State.
(21) `Owner' means a person who is the owner of any legal or
equitable interest in real property, which interest can be sold by legal
process, and who enters into a contract for the improvement of the real
property. The term includes a condominium association as to
improvements made to association property or common elements. The
term does not include any political subdivision, agency, or department
of the State, a municipality, or other governmental entity.
(22) `Perform' or `furnish' when used in connection with the words
`labor' or `services' or `materials' means performance or furnishing by
the lienor or by another for him.
(23) `Post' or `posting' means placing the document referred to on the
site of the improvement in a conspicuous place at the front of the site
and in a manner that protects the document from the weather.
(24) `Real property' means the land that is improved and the
improvements thereon, including fixtures, except any such property
owned by the State or any county, municipality, school board, or
governmental agency, commission, or political subdivision.
(25) `Site of the improvement' means the real property which is being
improved and on which labor or services are performed or materials
furnished in furtherance of the operations of improving such real
property. In cases of removal, without demolition and under contract,
of an improvement from one lot, parcel, or tract of land to another, this
term means the real property to which the improvement is removed.
(26) `Subcontractor' means a person other than a materialman or
laborer who enters into a contract with a contractor for the performance
of any part of such contractor's contract.
(27) `Sub-subcontractor' means a person other than a materialman or
laborer who enters into a contract with a subcontractor for the
performance of any part of such subcontractor's contract."
SECTION 2. This act takes effect upon approval by the Governor.
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