Construction is an integral part of growth in an economy, in a business and in an individual’s life. Every time there is a construction project there is growth in one are or another. Governments construct hospital, affordable housing, schools, and infrastructure such as roads, power lines and sewer lines to mention but a few. This construction projects are meant to improve the living standards of the citizenry of a country. Businesses are involved in constructing mega projects such as shopping malls, luxurious housing and office suites. All this are important projects that impact on the growth of a business.
On an individual capacity people are always involved in construction on a daily basis, building their homes, swimming pools, recreation facilities and so on. When any individual or firm gives a contractor a project to complete, they want an assurance that this project will be completed according to their specification, on time and on budget. As we will clearly see below, this is the reason every project owner demands that the contractor produces a surety bond before they can be assigned any job.
A surety bond is a document that gives the user assurance that the contractor, who is holding the surety bond, is capable of performing construction obligation bestowed upon their construction firm. This document is important to three parties, that is, the project owner, the contractor and the insurance company giving the surety bond. The project owner needs some assurances from the contractor as to their capacity to perform certain tasks. Be sure to learn more here!
Nonetheless, the project owner is not willing to rely on the word of the contractor. Even if he or she can rely on the word of the contractor they want assurances that if this contractor fails to meet their obligation the project owner can have a legal redress. The contractor needs an independent party to evaluate them and give their clients assurances that the constructor is up to the task. This is where the insurance company comes in to issue the contractor a surety bond. This surety bond tells the third party that the contractor is in a position to complete the project and if they don’t the insurance company will do it. Look for more information about bail bonds, go to http://www.huffingtonpost.com/topic/bail.
There are three types of surety bonds and they are a bid bond, a performance bond and a payment bonds. Bid bond focuses on the contract price. It assures the project owner that the contractor will complete the project at the agreed contract price. The performance bond is assures the project owner that if the contractor defaults on his or her obligation, the surety of the project will be responsible and will complete the project. The last bond which is the payment bond is an assurance to the project owner that the bail surety companies will fulfill their financial obligation to their sub contractors.
