Homeowners can get careless after a major weather event has come through their community, and their homes are damaged. They don't always ask to see licenses and certifications before they agree to let a stranger make extensive repairs to their homes. Many don't even see potential problems when the stranger demands to be paid before doing anything. Seattle, Washington city officials know most of these strangers are con artists. Professional contractors don't knock on doors to offer their services, and when they are called upon to do so, can produce contractor bonds Washington surety companies will be able to verify.
A contract bond is not the same thing as insurance, although in some respects they resemble each other. Insurance transfers risk from an individual to a third party. It compensates the injured party in case of loss. A contract or construction bond is a form of surety. It guarantees a third party will pay the debts incurred by another and is designed to prevent loss. This contract bond is a three party agreement between the surety company, the client, and the individual doing the work.
The most common kinds of contract agreements are bid, payment and performance. A bid bond guarantees potential clients contractors will obtain the other two types of agreements once the bids are won. A payment bond guarantees the clients that all suppliers and subcontractors will be paid in full, and the client will not face any liability for unpaid bills. A performance bond assures the clients that the job will be done according to the agreement he or she entered into.
Additional contract agreements include maintenance, supply, and site improvement. Contractors who construct waste management systems, sidewalks and streets in subdivisions must have a subdivision bond to guarantee all work is completed according to specifications.
In the mid nineteen thirties, Congress enacted the Miller Act. It required contractors to have payment and performance agreements when they were awarded public works contracts with a value in excess of one hundred thousand dollars. Since then, many states have enacted similar laws, called Little Miller Acts, regarding contracts for public works projects.
Contractors must meet certain standards before they are issued any kind of surety bond. They have to show they have the character to be trusted with contracting responsibilities and pay their bills promptly. A contractor must have the ability and capacity to perform the job. He or she has to have adequate equipment and the necessary staff to complete the work. A contractor must demonstrate financial security and reliability.
When contractors default the surety company has only a few options. They can pay the client the amount of money they lost. The company can negotiate with the client to rebid the job in order to complete it. Sometimes they decide to give contractors the capital they need to complete the work, with the agreement that the funds will be repaid with interest once the job is finished.
Defaulting on a bond has serious repercussions for contractors. It is hard to get another company to issue the agreements they need to bid on jobs, guarantee payment to third parties, and to assure clients they will perform a job as agreed.
A contract bond is not the same thing as insurance, although in some respects they resemble each other. Insurance transfers risk from an individual to a third party. It compensates the injured party in case of loss. A contract or construction bond is a form of surety. It guarantees a third party will pay the debts incurred by another and is designed to prevent loss. This contract bond is a three party agreement between the surety company, the client, and the individual doing the work.
The most common kinds of contract agreements are bid, payment and performance. A bid bond guarantees potential clients contractors will obtain the other two types of agreements once the bids are won. A payment bond guarantees the clients that all suppliers and subcontractors will be paid in full, and the client will not face any liability for unpaid bills. A performance bond assures the clients that the job will be done according to the agreement he or she entered into.
Additional contract agreements include maintenance, supply, and site improvement. Contractors who construct waste management systems, sidewalks and streets in subdivisions must have a subdivision bond to guarantee all work is completed according to specifications.
In the mid nineteen thirties, Congress enacted the Miller Act. It required contractors to have payment and performance agreements when they were awarded public works contracts with a value in excess of one hundred thousand dollars. Since then, many states have enacted similar laws, called Little Miller Acts, regarding contracts for public works projects.
Contractors must meet certain standards before they are issued any kind of surety bond. They have to show they have the character to be trusted with contracting responsibilities and pay their bills promptly. A contractor must have the ability and capacity to perform the job. He or she has to have adequate equipment and the necessary staff to complete the work. A contractor must demonstrate financial security and reliability.
When contractors default the surety company has only a few options. They can pay the client the amount of money they lost. The company can negotiate with the client to rebid the job in order to complete it. Sometimes they decide to give contractors the capital they need to complete the work, with the agreement that the funds will be repaid with interest once the job is finished.
Defaulting on a bond has serious repercussions for contractors. It is hard to get another company to issue the agreements they need to bid on jobs, guarantee payment to third parties, and to assure clients they will perform a job as agreed.
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