How Surety Bonds Guarantee Project Completion Part 1
Construction projects are a collection of components that all have to work in unison for a project to reach completion. When just one of these components fails to meet their responsibilities, it can put the whole project in jeopardy. This is where surety bonds come into play. In this two-part article, a Raleigh construction lawyer at Cotney Construction Law will be discussing how surety bonds help guarantee a construction project’s completion. If you are involved in a Raleigh construction bond dispute, it is in your best interest to consult with an experienced attorney at Cotney Construction Law.
What is a Surety Bond?
Surety bonds guarantee that all parties involved in a project meet their contractual obligations, whatever they may be. Surety bonds are often required on private and public projects as a way of mitigating risk.
The parties involved in a surety bond are a principal, an obligee, and a guarantor or surety. A principal, also known as an obligor, is the party that agrees to perform the bond obligation. Usually, but not always, contractors and construction companies are the principal. An obligee is the party, either a private owner or government entity, that is protected by the bond. Finally, a surety is the insurance company that issues the bond and takes on financial responsibilities in the event that the principal is unable to meet their obligations.
Not Just for Owners
Surety bonds aren’t just for the benefit of project owners. General contractors can obtain a Raleigh construction bond to protect themselves in the event that a subcontractor does not meet their obligations. All it takes to stall an entire project is for a single party to fail to meet their obligations. With so many workers constantly coming and going on construction projects, it’s important that contractors have a way of safeguarding themselves from potential financial setbacks.
As we’ll see in part-two there are several types of surety bonds, and they are all crucial in guaranteeing the completion of a construction project. For help deciding how to handle a bond claim, consult with a Raleigh construction attorney at Cotney Construction Law.
For more information on surety bonds, read part two.