How to Prevent Surety Bond Claims Part 1
Whenever a contractor pursues a public or private project there is potential for gains as well as losses. Things may happen outside of the contractor’s control such as negligence on the part of another party, but what is in the contractor’s control should be executed properly. An area that requires attention is surety bonds. It is critical that contractors make every effort to fulfill contractual duties and avoid bond claims. Our Bradenton construction lawyers will provide you with a breakdown of common bond claims and ways to avoid them. We will conclude our article in Part 2.
Types of Bond Claims
Surety bonds protects whoever requires the bond. Whenever a contractor doesn’t fulfill contractual obligations, the parties that the contractor is in a contract with can file a bond claim against the contractor and the surety bond will step in and compensate the party that the contractor is obligated to. The following are the most commonly filed bond claims:
- Performance bond claims are a result of a contractor failing to perform a bonded contract. This can happen for different reasons including financial issues,
- Payment bond claims happen when a contractor fails to compensate for agreed upon labor, services, or materials.
- Bid bond claims occur because upon award of a contract if a contractor fails to execute a project as outlined in the bid, parties may file a bid claim against the contractor.
How the Surety Helps
Sureties have ways of dealing with bond claims. When the surety receives a claim, the claim will be investigated for validity. If the claim is found to be valid, meaning it’s proven the contractor breached the contract, the surety will honor the claim and compensate the claimant appropriately. Other ways the surety may handle the dispute is to re-bid on a project, bring in a new contractor to complete the project, or provide additional financial assistance to the contractor to ensure the project is completed.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.