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New CCDC Bond Forms – Key Takeaways

On May 21st, 2024 the surety industry had some exciting news. For the first time since 2002, they completed a revision of the standard CCDC bond forms including Form 220 (Bid Bond), Form 221 (Performance Bond) and Form 222 (Labor and Material Payment Bond). This is something our industry and in particular, the Surety Association of Canada has been push for, for sometime. These forms required updating to more adequately respond to the service requirements of contractors and obligees.

The changes to the bond forms are multi-faceted but broadly include new terms, modified timelines and processes, standardized forms and new provisions addressing time sensitive issues. The idea here is that these new forms more adequately address the requirements of owner’s and contractors and avoid further fragmentation with owners and contractors developing a variety of forms, some of which create issues for surety capacity.

Below we will address some of the key changes to each form.

CCDC 220 – Bid Bond

Validity Period – includes concept of the timeline for which a bid bond remains valid after the closing date.

Tender Date – is now eliminated avoiding any confusion about having to issue addendums correcting the closing date when there is a tender date extension.

Quebec – provisions outlining the coverage period ensuring compliance with the Quebec Civil Code.

CCDC 221 – Performance Bond

Like other more recent forms (such as Ontario Construction Act forms) the new forms are much longer and encompassing especially with regards to providing clarity around the claims process and the forms the surety requires to respond to a performance bond claim.

In addition, the bond forms incorporate other aspects like a pre-notice meeting to attempt to deal with issues which could lead to a default. In addition, there is an option for post notice conference for a claimant to discuss with the surety what actions are required to keep a project on track and mitigate costs.

The timelines around respond are also tightened including 7 days time to arrange a pre-notice meeting, four business days to acknowledge receipt of a notice and 20 days following receipt of a notice to provide the Surety’s position.

Additionally, the forms provide clarity regarding what is covered and what isn’t. The coverage includes items like reasonable processional fees, reasonable external legal fees, reasonable out-of-pocket expenses, direct costs incurred as a result of time extensions, reasonable costs around interim and mitigation work and additional fees as agreed. It will not respond to liquidated damages or consequential damages.

CCDC 222 – Labor and Material Payment Bond

Similar to the updated performance bond the labor and material bond provides clarification and streamlining of the claims process by use of standard templates including notice templates, the surety making an acknowledgement and for providing of the surety’s position.

Furthermore and also like the performance bond the template has clarified and provided improved response timelines. These include 3 days notice to acknowledge receipt and request information, earlier of 10 days from receipt of information or 25 days from receipt of notice for the surety to provide a position and 10 business days following the Surety’s position to pay any undisputed amounts.

Furthermore, a point of contention with claimants on these bonds, the 2002 version included a limitation that a claim must be advanced within 90 days following the last day worked or materials supplied. In the new forms, this requirement has been removed.

The bond forms also contemplate the usual circumstance when the amount of claims exceeds the value of the bonds. In this case the bonds allow the surety to apply to the court for direction if this were to arise.

In addition, these bond forms extend coverage to one level of subcontracts and do not provide coverage a 2nd tier of subcontractors.

Overall, these are positive changes that provide enhancements of coverage and clarity of process to purchasers of bonds. As always we recommend that contractors or owners who purchase bonds to discuss in detail what bond form makes most sense for their situation.

 

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