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Developers under a plan approved by the city of Rye had constructed six luxury cooperative apartment buildings and were to construct six more. In order to obtain certificates of occupancy for the six completed buildings, the developers were required to post a bond with the city to insure completion of the remaining buildings.
The developers posted a $100,000 bond upon which Public Service Mutual Insurance Company, as guarantor or surety, agreed to pay $200 for each day after the contractual deadline that the remaining buildings were not completed.
After the contractual deadline, more than five hundred days passed without completion of the buildings. The city claims that its inspectors and employees will be required to devote more time to the project than anticipated because it has taken extra years to complete.
It also claims that it will lose tax revenues for the years the buildings are not completed. Should the city prevail in its suit against the developers and the insurance company to recover $100,000 on the bond? Explain.
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