within ninety days from the date on which such per- son did or performed the last of the labor or fur- nished or supplied the last of the material or rental equipment upon which such claim is made. How- ever, in no event shall the aggregate amount of any claim against such payment bond by a remote claimant exceed the amount due by the bonded contractor to the person to whom the remote claimant has supplied labor, materials, rental equip- ment, or services, unless the remote claimant has provided notice of furnishing labor, materials, or rental equipment to the bonded contractor. Such written notice to the bonded contractor shall be per- sonally served or sent by fax or sent by electronic mail or sent by registered or certified mail, postage prepaid, to the bonded contractor at any place the bonded contractor maintains a permanent office for the conduct of its business, or at the current address as shown on the records of the Department of Labor, Licensing and Regulation. After receiving the notice of furnishing labor, materials, or rental equipment, no payment by the bonded contractor shall lessen the amount recoverable by the remote claimant. How- ever, in no event shall the aggregate amount of claims on the payment bond exceed the penal sum of the bond. *** For purposes of this section, "bonded contractor" means a contractor or subcontractor furnishing a pay- ment bond, and "remote claimant" means a person having a direct contractual relationship with a sub- contractor of a bonded contractor, but no contractual relationship expressed or implied with the bonded contractor. [Emphasis added] • The Court defined a statutory bond as “those either (1) provided because required by statute and in accor- dance with the minimum guidelines set out in section 29-5-440 of the South Carolina Code or (2) that contain express or implied reference to the provisions detailed in the statute.” (Hard Hat at pg. 7) • The Court then defined a common law bond as “ei- ther (1) any bond not required by statute (i.e., voluntar- ily provided, perhaps to meet a contractual provision in the agreement between the parties), or (2) any bond required by statute but that specifically varies the statutory requirements so as to provide broader pro- tection.” (Hard Hat at pg. 8) Based upon those definitions, the Court said that, in this case, the payment bond was not provided because it was required by a statute but by the contract between the Gen- eral Contractor and the first tier subcontractor. Further, it did not contain any reference to the 29-5-440 and its notice requirements. Therefore, the Court found that the bond should be interpreted according to its terms and not those of the statute. Impact of the Ruling Although the high court’s ruling does not answer all questions that construction industry professionals may have, it is clear that 29-5-440 does not apply to all bond claims. And, that may open up the group of claimants on such bonds. However, to the extent that the bonds include a reference to the statute, the statutory requirements will continue to apply. Additionally, the Court’s decision was split, and the mi- nority concurring opinion did not agree that with the statu- tory/common law bond distinction. So, it is conceivable that these questions may well arise again. Supreme Court Appeal On appeal, the South Carolina Supreme Court reversed the trial court. In a 3-2 decision, Justices found that Hard Hat’s bond claim did not have to comply with the Notice of Furnishing provision found in 29-5-440. The basis of the Supreme Court’s finding rests on the language of the payment bond itself and the distinction be- tween statutory bond and common law bonds. 18 – December 2013 / January 2014 — The South Carolina Construction News John Davidson is a Member (partner) at Nexsen Pruet in Columbia. From writing initial contracts to project close outs, John helps construction industry clients in virtually all phases of their work. He has assisted in hospital, nurs- ing home, assisted living, condominium, apartment, re- tail, industrial and private residential projects that, when combined, total more than $500M.