By Bruce Jervis
Companies selling equipment or materials to construction contractors face a unique challenge. Payment security may exist in the form of public works payment bonds or private materialman’s liens, but there is a problem. These payment remedies are not general. In order to file a bond or lien claim, the seller must know the project into which the goods were incorporated.
Many suppliers of equipment and materials sell to constructors on an open account. The end use of the goods is not necessarily known. The ramifications of this dilemma are illustrated in a recent case from South Dakota.
A supplier of petroleum products sold to a contractor that batched aggregate for multiple projects. When the supplier didn’t get paid, it filed a claim against a public works payment bond. The problem was the product had been used on a different project, so the supplier filed against the wrong bond. And, the statutory claim filing period had expired with regard to the correct bond.
Have you seen examples of this problem? Do you have suggestions as to how suppliers can track product and protect their payment rights in these circumstances? I welcome your comments.