July 26, 2016
MICHIGAN SUPREME COURT ALLOWS MATERIAL SUPPLIER’S BOND CLAIM RECOVERY ON A PUBLIC WORKS PROJECT IN THE ABSENSE OF ACTUAL NOTICE TO THE PRIMARY CONTRACTOR OF THE MATERIAL SUPPLIER’S FURNISHING, INTERPRETING MCL 129.201:
Wyandotte Electric Supply Company v. Electrical Technology Systems
(decided May 3, 2016)
Summary submitted by Jean Ann S. Sieler, RCO Law, firstname.lastname@example.org
419-249-7900office 419-249-7911fax 419-467-9560cell
On May 3, 2016 the Michigan Supreme Court decided Wyandotte Electric Supply Company v. Electrical Technology Systems, Docket No. 149989, holding that a material supplier to a subcontractor could recover against the principal contractor’s payment bond, even though the principal contractor did not actually receive the Notice of Furnishing pursuant to MCL 129.201. The Court held that “service” was complete upon certified mail attempt. Importantly, the material supplier had proof of submission of certified mail to the Detroit post office pursuant to its tracking system, but it appeared the certified mail was never delivered to the principal contractor. However, this decision may be of assistance in those cases where the contractor fails to sign for certified mail over three attempts, resulting in delayed and expensive subsequent personal service or duplicative efforts when a prompt return receipt is not delivered from the post office.
In addition, the Supreme Court allowed for recovery against the bond of both a time-price differential of 1.5% per month on the unpaid account for the materials, as well as attorney fees incurred in the action to collect upon the bond, based upon the terms of an Account Agreement between the subcontractor and material supplier, which terms were inconsistent with the payment terms between the principal contractor and sub-contractor. Historically, bonding companies would decline attempts to recover time-price differentials and attorney fees based upon the unrelated contracts between suppliers and sub-contractors.
Finally, the Supreme Court allowed only post judgment interest to be recovered against the bond pursuant to the terms of the public works bond statute, rather than interest based upon the terms of the underlying contract.