Experienced contractors generally make a conscious effort to avoid claims situations, while being proactive about understanding the process. Utilizing the perfect surety gives those contractors the knowledge and power they need for their claims team. For any contractor to take on bonded jobs, basic comprehension is essential.
The three main types of construction bonds are: bid bonds, payment bonds, and performance bonds.
These bonds stem from situations when the principal is the successful bidder but cannot enter into the contract or provide final bonds. In bid bonds, the principal and surety are required to pay a specific sum to the obligee. The bond form caps liability at a particular amount (the difference between the principal’s bid and the next highest bidder’s bid) instead of exceeding the penal sum of the bid bond. The responsibility of this task is between the principal and surety.
When the principal fails to pay subcontractors, laborers, and/or suppliers, payment bonds give the surety the right to assert all of the principal and surety’s defenses, which sometimes include limitations on notice and time. Only proper “claimants” can benefit from these bonds, so the principal and surety need to confirm the claimant can pursue the claim.
A performance bond claim arises when the obligee defaults or terminates the principal for non-fulfillment regarding their contractual obligations. Handling a performance bond claim has various levels of importance, including cooperation, agreements, and challenges. One of the most trying decisions is to admit or deny liability. After analyzing contract documents, bond forms, factual issues, and possible defenses, the surety has to eventually decide whether to perform.
Surety partners will typically work in conjunction with contractors to avoid claims or mitigate the damages. Selecting the ideal surety with a good track record of minimizing legal fees while resolving claims is paramount for any contractor.
If you are seeking a construction bond, contact the specialists at Construction Bonding today.
At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.
Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/