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Contracts & Legal

Default

In Plain English

When a contractor or owner seriously fails to meet their contract obligations and does not fix the problem when given notice.

Definition

A default in a construction contract occurs when a party materially fails to perform its obligations and does not cure that failure within the time specified in a notice to cure. Common contractor defaults include abandonment of work, failure to pay subcontractors, and failure to maintain required insurance. Default triggers remedies including termination and surety bond claims.

Why It Matters in Bidding

Default is the legal trigger that exposes a contractor to its worst-case financial outcomes, including termination, surety takeover, and liability for completion costs. Estimators and project teams should understand default provisions during bid review because aggressive cure-period and notice language affects how much risk a bid actually carries. A single uncured default can outweigh years of accumulated margin.

Example

After a sub stops showing up and ignores a written notice to cure, the GC declares default, backcharges the cost of a replacement crew, and notifies the sub's surety to step in and fund completion.

Related Terms

Termination for CauseNotice to CureBreach of ContractSurety

Frequently Asked Questions

Default termination is for-cause and follows a material breach the party failed to cure, exposing them to completion costs and damages. Termination for convenience lets the owner end the contract without fault, typically paying the contractor for work performed plus reasonable close-out costs, but not lost anticipated profit on unbuilt work.
Most contracts require written notice describing the breach and giving a defined period, often several days, to fix it before default applies. Properly documenting the notice and the failure to cure is essential, because a default declared without following the contractual notice steps can itself become a breach.
If a defaulted contractor was bonded, the owner can make a claim against the performance bond. The surety may finance the original contractor, hire a completion contractor, or pay the bond penal sum. Surety involvement is a key reason owners require bonds on higher-risk or publicly funded projects.

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