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When undertaking a major construction project, it is imperative that you have a performance payment bond. This will help to safeguard your own interests as well as that of suppliers, workers and subcontractors among other parties. A bond is basically a contract between the issuer, normally an insurance company, and a contractor outlining the kind of compensation the client will get if the contractor fails to finish the construction works.
A performance bond basically ensures that the construction company executes the contract fully, and that the works are done according to quality and safety standards. Payment bonds are there to ensure that construction workers, suppliers and subcontractors get fair payment for their goods or services. These two bonds are commonly referred to as construction bonds, and they are meant to protect the developer from losses and any other financial liability that may arise from the construction project.
Nowadays, clients who have projects that involve a significant amount of money can use bonds to protect themselves from losses. Originally, only the federal government used bonds to prevent loss of taxpayer's funds. Back then non-completion of projects was so prevalent that almost every construction work that was funded by the government was never completed. Construction bonds helped to stop this trend.
While the contractor is required to get the bond from an insurance company, it is the client who pays for it. This means that the issuer acts as a guarantor for the construction company. This is because the company will step in and compensate the owner of the project if the construction company does not meet its end of the deal. Normally, the client or the owner of the project will have several options apart from just getting monetary compensation.
A client may file a claim for a number of reasons. One of them is if the quality of work done by the contractor is poor. The second is if workers, subcontractors and suppliers of materials are not paid well. Another reason is if the project is not completed.
If the project is not completed, the bond gives the project owner three options. The first is to hire another contractor to complete the works. The second option is to hire a completions contractor to finish the construction works. The last option allows the owner to complete the project personally, with the issuer covering all the costs.
Before you hire a construction firm, you need to ensure that it is registered and licensed. You also need to ensure that it is insured and bonded. Companies that meet these specifications are often more reliable, and offer services of the highest quality. It is also important that you check the rating of a company with the Better Business Bureau.
When you want to have a legally sound performance payment bond, you need to hire a lawyer to draft the agreement that outlines all the provisions. Your attorney will ensure that you get monetary compensation as outlined in the bond if and when the contractor fails to complete the project. However, you should know that if the matter goes to court, you will only be able to recover a small amount of money if the insurance company has already offered some assistance as outlined in the contract.
A performance bond basically ensures that the construction company executes the contract fully, and that the works are done according to quality and safety standards. Payment bonds are there to ensure that construction workers, suppliers and subcontractors get fair payment for their goods or services. These two bonds are commonly referred to as construction bonds, and they are meant to protect the developer from losses and any other financial liability that may arise from the construction project.
Nowadays, clients who have projects that involve a significant amount of money can use bonds to protect themselves from losses. Originally, only the federal government used bonds to prevent loss of taxpayer's funds. Back then non-completion of projects was so prevalent that almost every construction work that was funded by the government was never completed. Construction bonds helped to stop this trend.
While the contractor is required to get the bond from an insurance company, it is the client who pays for it. This means that the issuer acts as a guarantor for the construction company. This is because the company will step in and compensate the owner of the project if the construction company does not meet its end of the deal. Normally, the client or the owner of the project will have several options apart from just getting monetary compensation.
A client may file a claim for a number of reasons. One of them is if the quality of work done by the contractor is poor. The second is if workers, subcontractors and suppliers of materials are not paid well. Another reason is if the project is not completed.
If the project is not completed, the bond gives the project owner three options. The first is to hire another contractor to complete the works. The second option is to hire a completions contractor to finish the construction works. The last option allows the owner to complete the project personally, with the issuer covering all the costs.
Before you hire a construction firm, you need to ensure that it is registered and licensed. You also need to ensure that it is insured and bonded. Companies that meet these specifications are often more reliable, and offer services of the highest quality. It is also important that you check the rating of a company with the Better Business Bureau.
When you want to have a legally sound performance payment bond, you need to hire a lawyer to draft the agreement that outlines all the provisions. Your attorney will ensure that you get monetary compensation as outlined in the bond if and when the contractor fails to complete the project. However, you should know that if the matter goes to court, you will only be able to recover a small amount of money if the insurance company has already offered some assistance as outlined in the contract.
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