Legal Blog

Fish or Cut Bait

Some cynics postulate that the purpose of insurance and bonding companies is to accept premiums and deny claims. Sometimes the cynics may be close to the mark but, in other cases, they are far off it. One such case was Cooperative D’Habitation Antigonish v. Laurentian General, a 2001 decision of the Ontario Superior Court of Justice.

Bond 

A general supplied a performance bond from its bonding company. The bond allowed for a claim within two years of the date that final payment came due under the contract. The warranty period under the general contract was only one year.

During the warranty period, the owner notified the general about deficiencies. When the general did not complete the deficiencies, the owner claimed against the bond. However, the owner made its claim more than three years after the bond limitation period started to run.

The owner noted that the general contract was incorporated by reference into the bond and that the owner gave the general notice under the general contract regarding the warranties within the one-year warranty period. The owner therefore argued that the owner did not have to give notice to the bonding company within the two-year limitation period set out in the bond. In essence, the general argued that there were two conflicting clauses in the bond and that it only needed to give notice to the general under the provision set out in the general contract.

Decision 

The motions judge made short shrift of this silly argument. He noted that the owner had stipulated the form of the bond in the general conditions to the contract and was, therefore, stuck with all of the terms of the bond, including the limitation period. Frankly, we do not much care whether the form of bond was set out in the general conditions. The bond itself contained a limitation period. The owner had to sink or swim with it. In this case, the owner sunk because the judge dismissed its action.