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1 The Contractor and the Surety, jointly and severally,
<br />bind themselves, their heirs, executors, administrators,
<br />successors and assigns to the Owner for the performance
<br />of the Construction Contract, which is incorporated herein
<br />by reference.
<br />2 If the Contractor performs the Construction Contract,
<br />the Surety and the Contractor shall have no obligation
<br />under this Bond, except to participate in conferences as
<br />provided in Subparagraph 3.1.
<br />3 If there is no Owner Default, the Surety's obligation
<br />under this Bond shall arise after:
<br />3.1 The Owner has notified the Contractor and the
<br />Surety at its address described in Paragraph 10 below
<br />that the Owner is considering declaring a Contractor
<br />Default and has requested and attempted to arrange a
<br />conference with the Contractor and the Surety to be
<br />held not later than fifteen days after receipt of such
<br />notice to discuss methods of performing the Construc-
<br />tion Contract. If the Owner, the Contractor and the
<br />Surety agree, the Contractor shall be allowed a reason-
<br />able time to perform the Construction Contract, but
<br />such an agreement shall not waive the Owner's right, if
<br />any, subsequently to declare a Contractor Default; and
<br />3.2 The Owner has declared a Contractor Default and
<br />formally terminated the Contractor's right to complete
<br />the contract. Such Contractor Default shall not be de-
<br />clared earlier than twenty days after the Contractor and
<br />the Surety have received notice as provided in Sub-
<br />paragraph 3.1; and
<br />3.3 The Owner has agreed to pay the Balance of the
<br />Contract Price to the Surety in accordance with the
<br />terms of the Construction Contract or to a contractor
<br />selected to perform the Construction Contract in accor-
<br />dance with the terms of the contract with the Owner.
<br />4 When the Owner has satisfied the conditions of Para-
<br />graph 3, the Surety shall promptly and at the Surety's ex-
<br />pense take one of the following actions:
<br />4.1 Arrange for the Contractor, with consent of the
<br />Owner, to perform and complete the Construction
<br />Contract; or
<br />4.2 Undertake to perform and complete the Construc-
<br />tion Contract itself, through its agents or through inde-
<br />pendent contractors; or
<br />4.3 Obtain bids or negotiated proposals from
<br />qualified contractors acceptable to the Owner for a
<br />contract for performance and completion of the Con-
<br />struction Contract, arrange for a contract to be pre-
<br />pared for execution by the Owner and the contractor
<br />selected with the Owner's concurrence, to be secured
<br />with performance and payment bonds executed by a
<br />qualified surety equivalent to the bonds issued on the
<br />Construction Contract, and pay to the Owner the
<br />amount of damages as described in Paragraph 6 in ex-
<br />cess of the Balance of the Contract Price incurred by the
<br />Owner resulting from the Contractor's default; or
<br />4.4 Waive its right to perform and complete, arrange
<br />for completion, or obtain a new contractor and with
<br />reasonable promptness under the circumstances:
<br />.1 After investigation, determine the amount for
<br />which it may be liable to the Owner and, as
<br />soon as practicable after the amount is deter-
<br />mined, tender payment therefor to the
<br />Owner; or
<br />.2 Deny liability in whole or in part and notify the
<br />Owner citing reasons therefor.
<br />5 If the Surety does not proceed as provided in Paragraph
<br />4 with reasonable promptness, the Surety shall be deemed
<br />to be in default on this Bond fifteen days after receipt of an
<br />additional written notice from the Owner to the Surety
<br />demanding that the Surety perform its obligations under
<br />this Bond, and the Owner shall be entitled to enforce any
<br />remedy available to the Owner. If the Surety proceeds as
<br />provided in Subparagraph 4.4, and the Owner refuses the
<br />payment tendered or the Surety has denied liability, in
<br />whole or in part, without further notice the Owner shall be
<br />entitled to enforce any remedy available to the Owner.
<br />6 After the Owner has terminated the Contractor's right
<br />to complete the Construction Contract, and if the Surety
<br />elects to act under Subparagraph 4.1, 4.2, or 4.3 above,
<br />then the responsibilities of the Surety to the Owner shall
<br />not be greater than those of the Contractor under the
<br />Construction Contract, and the responsibilities of the
<br />Owner to the Surety shall not be greater than those of the
<br />Owner under the Construction Contract. To the limit of the
<br />amount of this Bond, but subject to commitment by the
<br />Owner of the Balance of the Contract Price to mitigation of
<br />costs and damages on the Construction Contract, the Sure-
<br />ty is obligated without duplication for:
<br />6.1 The responsibilities of the Contractor for correc-
<br />tion of defective work and completion of the Construc-
<br />tion Contract;
<br />6.2 Additional legal, design professional and delay
<br />costs resulting from the Contractor's Default, and re-
<br />sulting from the actions or failure to act of the Surety
<br />under Paragraph 4; and
<br />6.3 Liquidated damages, or if no liquidated damages
<br />are specified in the Construction Contract, actual dam-
<br />ages caused by delayed performance or non- perfor-
<br />mance of the Contractor.
<br />7 The Surety shall not be liable to the Owner or others for
<br />obligations of the Contractor that are unrelated to the Con-
<br />struction Contract, and the Balance of the Contract Price
<br />shall not be reduced or set off on account of any such
<br />unrelated obligations. No right of action shall accrue on
<br />this Bond to any person or entity other than the Owner or
<br />its heirs, executors, administrators or successors.
<br />8 The Surety hereby waives notice of any change, includ-
<br />ing changes of time, to the Construction Contract or to
<br />related subcontracts, purchase orders and other obliga-
<br />tions.
<br />9 Any proceeding, legal or equitable, under this Bond
<br />may be instituted in any court of competent jurisdiction in
<br />the location in which the work or part of the work is located
<br />and shall be instituted within two years after Contractor
<br />Default or within two years after the Contractor ceased
<br />working or within two years after the Surety refuses or fails
<br />to perform its obligations under this Bond, whichever oc-
<br />curs first. If the provisions of this Paragraph are void or
<br />prohibited by law, the minimum period of limitation avail-
<br />AIA DOCUMENT A312 - PERFORMANCE BOND AND PAYMENT BOND • DECEMBER 1984 ED. • AIA 8
<br />THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVE., N.W., WASHINGTON, D.C. 20006 A312 -1984 2
<br />THIRD PRINTING • MARCH 1987
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