By James Germano, Esq., Manager and Counsel, AIA Contract Documents
In 2020, the American Institute of Architects (AIA) introduced a new version of the Warranty Bond, specifically the A312-2020 Warranty Bond. While this bond primarily covers the contractor’s warranty obligations set forth in the construction contract, there are several unique elements worth exploring. Here, we’ll review three important aspects of the AIA’s new warranty bond that every contractor and construction professional should be aware of.
One key difference between the AIA’s Warranty Bond and other types of bonds is the coverage term. The A312-2020 Warranty Bond comes into effect at final completion of the project, and its coverage extends for two years unless otherwise agreed upon by the parties involved. This coverage period is essential because it begins even if the construction contract specifies a longer warranty period. As a result, the bond’s term is separate from any other warranties or guarantees outlined in the contract, making it critical to understand when the bond coverage starts and ends.
A notable feature of the A312-2020 Warranty Bond is its ability to be extended. According to Section 8 of the bond, the owner has the option to request an extension of the bond’s term. If this request is made, the surety (the party guaranteeing the bond) can extend the bond’s term by issuing a continuation certificate or a rider that sets a new expiration date.
However, it’s important to note that the total liability of the surety remains limited to the original bond amount stated on the first page of the bond, even if the term is extended. This limitation on liability ensures that the surety is not responsible for a greater amount than originally agreed upon, regardless of how long the bond is extended.
Unlike other construction bonds, the AIA Warranty Bond does not require the owner to terminate the construction contract before triggering the surety’s liability. Typically, many bonds—such as the AIA A312-2010 Performance Bond—require the owner to formally terminate the construction contract before a surety is obligated to take action.
However, the AIA Warranty Bond addresses a different situation. Since this bond provides coverage after the project has been completed, the contractor has already substantially fulfilled their contractual obligations by the time the warranty period begins. As such, the bond’s coverage kicks in after the project reaches final completion.
Under this bond, the surety’s obligations are triggered if:
This streamlined default procedure eliminates the need for contract termination, allowing the surety’s obligations to arise quickly and without unnecessary delays.
The AIA A312-2020 Warranty Bond introduces several key differences from other bonds used in the construction industry, including its unique terms regarding coverage duration, extension options, and the default procedure. Contractors, owners, and sureties alike should understand these features to manage their risks and obligations effectively.
By becoming familiar with the bond’s terms and procedures, you can ensure that your construction projects remain compliant and that warranty issues are addressed promptly and efficiently.
For further information on the AIA’s contract documents and how the A312-2020 Warranty Bond can benefit your project, visit the AIA Contract Documents official website or consult with a legal expert specializing in construction law.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.