A bond or bonds by one or more duly authorized, California admitted corporate sureties with a minimum A rating to secure faithful performance shall be in substantially the following form:
Whereas, the City Council of the City of Live Oak, State of California, and _____ (hereinafter designated as "principal") have entered into an agreement whereby principal agrees to install and complete certain designated public improvements, which said agreement, dated _____, 20_____, and identified as project _____, is hereby referred to and made a part of; and
Whereas, said principal is required under the terms of said agreement to furnish a bond for the faithful performance of said agreement.
Now, therefore, we, the principal and _____, as surety, are held and firmly bound unto the City of Live Oak (hereinafter called the "City"), in the penal sum of _____ dollars ($_____) lawful money of the United States, for the payment of which sum and well and truly to be made, we bind ourselves, our heirs, successors, executors and administrators, jointly and severally, firmly by these presents.
The condition of this obligation is such that if the above bounded principal, his or her or its heirs, executors, administrators, successors or assigns, shall in all things stand to and abide by, and well and truly keep and perform the covenants, conditions and provisions in the said agreement and any alteration thereof made as therein provided, on his or her or their part, to be kept and performed at the time and in the manner therein specified, and in all respects according to their true intent and meaning, and shall indemnify and save harmless the City of Live Oak, its officers, agents and employees, as therein stipulated, then this obligation shall become null and void; otherwise it shall be and remain in full force and effect.
As a part of the obligation secured hereby and in addition to the face amount specified therefor, there shall be included costs and reasonable expenses and fees, including reasonable attorney's fees, incurred by the City in successfully enforcing such obligation, all to be taxed as costs and included in any judgment rendered.
The surety hereby stipulates and agrees that no change, extension of time, alteration or addition to the terms of the agreement or to the work to be performed thereunder or the specifications accompanying the same shall in anywise affect its obligations on this bond, and it does hereby waive notice of any such change, extension of time, alteration or addition to the terms of the agreement or to the work or to the specifications.
The surety's obligations to the City arise immediately upon the default of the principal, without demand or notice. The surety waives the provisions of California Civil Code Section
2845 and, in light of such waiver, the City shall not be required to proceed against the principal, nor shall the City be required to pursue any other remedy in the City's power. In light of such waiver, the City may proceed directly against the surety upon default of the principal, and it shall not be a defense to the City's claims against the surety that the City has failed to proceed against the principal (or any other person whom the surety believes might be responsible for the breach of the principal) or to pursue any other remedy in the City's power. In addition to the foregoing, the surety waives any rights or defenses it may have in respect to its obligations as a surety by reason of any election of remedies by the City.
To the extent that the principal's obligations are secured by real property or an estate for years, the surety waives all rights and defenses that it may have because the principal's obligation is so secured. This means, among other things: (1) the City may collect from the surety without first foreclosing on any real or personal property collateral pledged by the principal; (2) if the City forecloses on any real property collateral pledges by the principal: (A) the amount of the obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, (B) the City may collect from the surety even if the City, by foreclosing on the real property collateral has destroyed any rights the surety may have to collect from the principal. This is an unconditional and irrevocable waiver of any rights and defenses that the surety may have because the principal's obligation is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 1080a, 1080b, 1080d or 726 of the Code of Civil Procedures.
The surety waives all rights and defenses arising out of an election of remedies by the City, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation has destroyed the sureties rights of subrogation and reimbursement against the principal by the operation of Section
580d of the Code of Civil Procedure, or otherwise.
Because the surety's obligations to the City are absolute and unconditional upon default of the principal, it shall be no defense to the surety's obligations to the City that the principal is or has become insolvent or that the project which is the subject of the principal's obligations is or has become economically infeasible. In that regard, doctrines such as "Frustration of Purpose" or "Commercial Frustration" or "Illegal Forfeiture" or similar doctrines shall not defeat the surety's absolute and unconditional obligation to the City upon the default of the principal. The surety has specifically undertaken the risks that the principal may be or become insolvent or that the project which is subject of the principal's obligation may presently or in the future, lack commercial viability.
In the event the principal defaults in the performance of its obligations, the surety may elect, either directly or through appropriate contractors to perform in the place of the principal. If the surety elects to proceed in this fashion, it shall provide written notice of such election to the City within 30 days after surety becomes aware of the principal's default. If the surety elects to complete the obligations of the principal (as opposed to paying money damages to the City occasioned by such breach) the surety shall cause the obligations of the principal to be performed as soon as is reasonably possible, but in no event later than nine months following knowledge of the breach by the principal. In the event the surety elects to perform the principal's obligations, the City shall be entitled to compel the surety, by way of specific performance, to perform such obligations.
If the surety does not elect to perform the principal's obligations, the surety shall deposit with the City a sum equal to the cost of the uncompleted portion of the work which comprises the principal's obligation. The City's City Engineer shall determine the estimated cost of the uncompleted portion of the work and the surety shall make such deposit with the City within five days of receipt of the City Engineer's estimate. The City shall not be required to expend any of its own funds to complete the work nor to incur "out of pocket" damages inasmuch as the City's damages are measured by the value of its unfulfilled right, namely the costs of completing the obligations of the principal by installing the bargained-for improvements. Upon deposit of the estimated cost of completion with the City, the City may proceed to bid the remainder of the work as a public project pursuant to the
Public Contract Code and the surety shall be obligated to continue to deposit such additional funds as may be necessary from time to time until the improvements are complete and accepted by the City or until the surety has exhausted the penal sum of the bond. Should the surety deposit more funds than are necessary to satisfy the principal's obligation, then the City shall refund any balance remaining upon final acceptance of the improvements. No interest shall be paid on any deposits made with the City.
Underwriting assumptions and cost estimates of the surety shall not have any bearing, whatsoever, on the Surety's liability under this bond. By way of example, if, when making underwriting decisions regarding issuing this bond, a cost estimate was prepared regarding the principal's obligations to the City, the fact that an item was omitted from the cost estimate (which item was an obligation of the principal to the City), shall in no way defeat or diminish the Surety's obligation to the City with respect to this omitted item. By way of further example, if the underwriting decision to issue this bond included a cost estimate of items and a particular item was estimated at a cost significantly less than the amount actually required to perform such item, this fact shall in no way defeat or diminish the surety's obligation to the City. Namely, the surety shall be obligated to the full amount of the penal sum of the bond, with respect to all matters which are the principal's obligation to the City, whether such items are actually included in any cost estimate (or if so included, are estimated at a cost far less than the actual cost to perform such items). Likewise, the adequacy and amount of any premium (and whether or not such premium was sufficient for the risk assumed by the surety) shall have no bearing on surety's absolute and unconditional obligation to the City upon the principal's default of its obligation under this bond.
In witness whereof, this instrument has been duly executed by the principal and surety above named, on _____, 20__.