6 Defenses of the Payment and Performance Bond Surety under Florida Law

Under Florida law, a surety generally has all of the rights and defenses of its principal (the general contractor or subcontractor) and an array of unique surety defenses.

Florida courts allow sureties to assert the defenses and claims of its principal because a surety’s liability is typically “coextensive” with that of its principal. One scenario where liability is not actually coextensive is if the surety has a personal surety defense, such as failure to comply with conditions precedent (such as the claimant’s failure to strictly comply with procedure and time limits set forth in Florida’s notoriously complex surety bond statute). On the flip-side, unusual situations where the surety has been historically prevented from asserting its principal’s defense include (a) insolvency, (b) lack of personal jurisdiction, and (c) the principal’s personal defense of statute of limitations (not to be confused with the surety’s defense of statute of limitations, which, as discussed below, is certainly available to the surety under Florida statutory and common law).

Without further adieu, below is a non-exhaustive list of defenses a surety may explore in Florida, along with a very short introduction to the substance and situations where such defenses could arise.

1. Penal Sum of the Bond

A surety’s exposure is generally limited to the dollar amount stated on the bond. This is called the “penal” (or penalty) sum, and it is one of the most important defenses available to the Florida surety.

The instances where a claimant can recover an amount beyond the penal sum are rare. One such instance where some courts have imposed liability beyond the penal sum of the bond is where the surety is found liable to the claimant for prejudgment interest and statutory attorneys fees under Florida’s Insurance Code. The justification sometimes offered for such departure from the bright-line penal sum rule is that statutory attorneys’ fees are deemed unrelated to the penal sum of the bond, thereby presenting a situation where the surety may be exposed to aggregate liability in excess of the penal sum.

2. Material Deviation / Pro Tanto Discharge

If the principal’s obligations under the bonded contract are materially altered, and the surety did not consent, then a surety may be discharged upon a showing of prejudice. Florida law typically limits the surety’s discharge to the extent of the prejudice caused by such change in underlying conditions.

This doctrine is sometimes referred to as the “cardinal change rule.” Generally Florida courts only discharge sureties to the extent of the prejudice. This is known as the “pro tanto discharge” approach (as opposed to a total or absolute discharge of the surety’s bond obligations).

In one famous Florida case, a contract specified a particular brand of air conditioning units, and the contract said the plans & specifications could not be altered without the written consent of the surety. The air conditions used were an inferior model. The trial court decided the surety was discharged to the extent of damages based on the inferior air conditioning equipment. The appellate court agreed, upholding the surety’s pro tanto discharge.

3. Obligee’s Improper, Unauthorized, or Advance Payment

If the owner/obligee makes a premature or unauthorized payment in violation of the payment provisions of the bonded contract, this may discharge the surety’s bond obligations. It is a fundamental tenant of suretyship that an obligee’s improper payment to the bonded principal presents a situation where the risk undertaken and accepted by the surety may be materially increased. In such situations, the obligee’s “overpayment” or improper payment generally entitles the surety to a “pro tanto discharge” defense.

Such situations are more common in the performance bond arena, but a few Florida courts have addressed the improper payment situation in the context of a payment bond. The Third District Court of Appeals, which governs trial courts in Miami, has decided an improper payment to the principal may deplete the contract proceeds available to the surety which the surety would have otherwise been able to use to satisfy its obligations. Therefore, the surety may have a defense — or more likely a salvage opportunity against the owner.

The overpayment doctrine generally requires the surety to plead and prove prejudice resulting from the improper payment(s). And the surety’s discharge would normally be only up to the extent of the prejudice rather than a total discharge.

4. Statute of Limitations

Florida law provides strict time limits for bringing a claim on a payment or performance bond claim. If the claimant’s suit is commenced outside of the time limitations, the surety will generally have a complete defense to the action.

The time limits under the payment bond statute (for statutory payment bonds) is one year after final furnishing. This period may be shortened to as little as 60 days if the surety decides to file a notice of contest of claim.

In some situations even where the lawsuit is commenced after expiration of the statute of limitations, a few Florida courts have utilized their equitable powers to revive the claim under the doctrine of equitable tolling or equitable estoppel. The surety might also lose a statute of limitations defense under the legal theories of waiver and contractual tolling. Importantly, if the surety asserts statute of limitations, it normally must prove when the cause of action “accrued,” i.e. when the statute of limitations stopwatch started. Pinpointing the accrual date is sometimes a complicated task, depending on the type of claim asserted by the obligee.

Moreover, a statute of limitations generally does not bar an action in equity. In actions at equity, as opposed to actions at law, the only “statute of limitations” the surety could typically avail itself of is the equitable defense of laches (a French word for “slackness,” meaning the plaintiff unreasonably delayed bringing suit). Examples of actions in equity include unjust enrichment, declaratory judgment, and a suit seeking an injunction.

5. Misrepresentation, Concealment, or Fraud by the Obligee

If an obligee conceals facts or makes a negligent or fraudulent positive misrepresentation to the surety knowing the surety will rely on such statements (or would change its mind if such concealments were revealed) then the obligee’s claim against the surety may be barred.

The elements of the surety’s defense vary depending on when the misrepresentation or non-disclosure was made, and by the type of the misrepresentation. For example, a nonfraudulent misrepresentation generally must be material (or significant to the surety’s bonding decision) for the surety to have a viable defense. On the other end of the spectrum, if the obligee commits a fraudulent misrepresentation, then materiality is not an issue. The rationale for this distinction is usually explained by the fact that the law does not want to reward litigants who knowingly commit fraud. On the other hand, the law does not want to disproportionately punish parties who did not necessarily intend to misrepresent facts to the other party.

Generally the surety must prove the obligee had a duty to the surety. An example of a situation where the obligee has a duty to disclose and not commit a misrepresentation is where the obligee sends the surety an “all rights letter” that promises to the surety that the obligee is not in possession of any facts indicating the principal is likely to, or is already in, default. Such letters are sometimes required when the surety is deciding whether to issue a payment and performance bond after the project has already started.

Examples of concealment or misrepresentation that present the surety with a defense to the performance bond action are:

  • Mischaracterizing the work required of the principal
  • Failing to disclose financial problems of the principal (where such information is possessed by the obligee and unlikely to be readily available to the surety)
  • The obligee does not reveal prior, existing, or foreseeable defaults of the principal (where the obligee has such a duty to inform the surety of these types of issues)

6. Prior Material Breach

The prior material breach of the complaining party is a defense to the bond action. This is because Florida law analyzes surety performance and payment bonds under the general law of contracts. As such, the classic defense of prior material breach may be available to a surety in Florida.

As you might expect, the surety will generally have to pove that the obligee’s prior breach is significant. A de minimis (insignificant) breach by the obligee usually does not present the surety with a viable prior breach defense. The precise delineation between de minimis and material is, like many of the lines drawn by Florida common law, fertile grounds for dispute. The core issue is whether the obligee’s preceding breach significantly, inexcusably, and adversely impacted the surety’s rights and obligations.


The foregoing discussion serves as a brief introduction to just a few defenses in the Florida surety’s arsenal. Florida sureties have a wide array of defenses due to their traditionally favored position under the common law. Remember, Florida law has long established that the surety is generally entitled to assert all of the defenses of the bonded principal. Our upcoming blog posts will continue the discussion of the surety’s defenses, including outlining more defenses for the surety to explore, along with an introduction into some of the major nuances of the defenses developed under Florida’s unique approach to the law of suretyship.

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