| |
Developing Of Construction Bond
By Ron victor
Introduction:
Construction bond is a form of surety bond which is a mandatory for financial investors for large construction and federal construction projects. The principal has given the written statement that he will complete the entire contract according to the norms. He will complete the contract at no additional cost, in case the contractor fails to perform his obligation. Since construction bond is a risk management bond, it is not guaranteed that it will complete the construction projects. This bond will protect interest of the individual and other structure that the construction has been taken place as per contract.
Generally construction contractors are well known with the concept of securing surety bonds, but they do not know that they will create a relationship between the principal, the obligee, the surety.constrution lawyers, are aware of the legal rules and act of the principal, obligee, and surety, but they are not aware of knowledge of obtaining bonds. This article directs both contractors and lawyers.
A construction surety bond is a written statement that the contractor will perform
His obligation as per bond. It guarantee that the principal will perform his obligation .if he fails the contract becomes void and he will sued in the court for further actions.constrution bond is otherwise called "condition bond". If the principal fails to perform his obligation, both the principal and the surety will be asked to pay penalty amount.constrution surety bond are of different types like bid bond, performance bond, payment bond.
Bid bond:
A bid bond is a written statement which guarantees to the obligee that the principal will offer his bid, as awarded in the contract. In this type of bid, both principal and the surety are sued, in failure of their contract. They have to pay the additional expenses incurred by the obligee for breaking of contract. The penalty amount will be ten to twenty percent of the contract. If the principal refuses to bid the surety has to undergone the risk.
Performance bond:
This bond guarantees the obligee that the contractor will finish his contract as per terms and condition relating to time and price. The obligee is the owner of the contract and he may sue the principal and the surety, in failure of the contract. If the principal fails, he may ask the surety to perform or complete the contract. The surety has his choices of completing the contract, either with his own construction contractor or selecting another contractor to complete the contract or paying the additional cost to the owner, to complete his contract. The penalty amount paid by the principal and the surety will be amount of construction contract. If the surety himself constructs the contract with his own contractor then the penalty amount will be nullified. Here the surety has to take the full risk of constructing the contract without loss of time and money of the obligee, I.e the owner. Performance bond usually protect the interest of the owner against any fraud or misrepresentation.
Payment bond:
In this type of bid, the obligee i.e the owner will give a written statement to the principal that he/she will pay the contract amount has mentioned in the bond without fail. This bond protect the principal against risk, incase of failure of the contract by the owner. It also ensures that the subcontractor and the suppliers also act as per contract. Incase of failure of contract the principal may sue against the obligee or he may Break the contract.
Supply bond:
It is a bond created between the principal and the suppliers or subcontractors, that they will supply the material or completes the contract with in stated period as mentioned in the contract. It protects the principal against loss of time and value.
Construction bond has its merits and demerit.
Merit of construction bond:
• It ensures the obligee that the contract will be completed within stated period.
• The principal ensures that he will finish the contract as per norms.
• It improves the reputation of the constructor or the contractor.
• It improves the quality & quantity of work
Demerits of construction bond:
• If contractor fail, the accountability of completing the contract, belongs to the surety.
• Once contract has been signed, then no one can break the contract, though the contract not taken place under legal procedure.
Conclusion:
Construction bond ensures proper completion of contract with in stated period. Thus construction bond protect, both the principal and the obligee.Here the full risk as been undergone by the surety. Incase if failure on both the side he has take the risk
About the Author
Ron victor is a SEO copywriter for http://www.integritybonds.com
He written many articles in various topics. For more information about Construction Surety Bond visit our site http://www.integritybonds.com/surety_bond.html
Contact him at ron.seocopywriter@gmail.com
Article Source: http://www.simplysearch4it.com/article/41904.html
| If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/41904.html" as shown above and make it hyperlinked. |
| Some other articles by Ron victor | How to Choose the Perfect Granite
Granite said to be the pleasant igneous rock which is formed in the earth for millions of the years from heat and fusion. It comprises of quartz, feldspar and mica. Granite is the hard course ...
Buy House with Resale Value
When the home property purchased by you should have a good resale value. The house property purchased should have resale value, probably to pay off your debt. There are many factors to be considered before buying ...
Stop Foreclosure - We buy houses
The term foreclosure refers to the circumstances, which arise due to the nonpayment of loan to the lender. When the borrower failed to pay ...
Common Mistakes Done By The Buyers During Purchase
Purchasing a house property needs more experience in the house property business as well as some knowledge in that. The buyer deals with different kinds of experience while he dealing a home purchase. That too, when ...
Sell Your Home By Yourself
Properties can be sold by the house owners individually. Selling the properties individually is not a difficult task. It depends upon the seller's interest, attitude and approach regarding the house sale. When a ...
Real Estate Investing Strategies
Investing in real estate market carries risk. The reason for this risk statement is that, it carries fluctuation. Investing in the real estate market without having adequate knowledge involves high ...
|
|
| |
|
|
|
