QuestionsQuestions (Act No. 3688)
To protect persons and entities that furnish labor and materials for public works by requiring contractors to post a penal bond with an obligation to pay such labor and material suppliers, and by granting them a right to intervene or sue on the bond under specified conditions.
Any person, partnership, or corporation entering into a formal contract with the Government for public buildings or public works must execute the usual penal bond with good and sufficient sureties before commencing the work.
That the contractor or his/its subcontractors shall promptly make payments to all persons supplying labor and materials in the prosecution of the work covered by the contract.
Persons, companies, or corporations that have furnished labor and materials used in the construction or repair of public buildings or public works, for which payment has not been made.
They have the right to intervene and be made parties to the Government’s action on the bond, so their claims can be adjudicated in that action and in the resulting judgment—subject to the Government’s priority.
The Government’s claim and the judgment in its favor have priority. Only after the Government is paid in full from the surety’s liability are the remainder distributed pro rata among intervenors.
After paying the full amount due to the Government, the remainder (if any) is distributed pro rata among the intervening labor and material suppliers; no one receives beyond pro rata share based on total coverage available.
If no suit is brought by the Government within six months from completion and final settlement of the contract, or if the Government expressly waives its right to institute action, suppliers may sue upon application and compliance with requirements.
They must apply and furnish an affidavit to the department under whose direction the work was prosecuted stating that labor or materials were supplied for the work and that payment has not been made, and they must be furnished a certified copy of the contract and bond.
In the Court of First Instance in the district where the contract was to be performed and executed, and not elsewhere.
The suit must be commenced within one year after the performance and final settlement of the contract (and not later), and it cannot be commenced before complete performance and final settlement of the contract.
It shall not be commenced until after the complete performance of the contract and final settlement thereof.
Only one action shall be brought where suit is instituted by a creditor or by creditors. Any creditor may file and be made a party within one year from completion and final settlement.
Judgment is given to each creditor pro rata of the amount of the recovery.
The surety may pay into court the full amount of its surety liability (the penalty in the bond), less any amount it already paid to the Government due to the bond, for distribution among claimants; upon doing so, it is relieved from further liability.
Personal notice of the pendency of the suits must be given to all known creditors informing them of their right to intervene as the court may order, and additional notice by publication in a newspaper of general circulation in the province or town where the contract is being performed for at least three successive weeks, with the last publication at least three months before the deadline.