A performance bond, sometimes referred to as a contract bond, is a surety bond that is issued to a contractor before the start of a construction project that guarantees the contractor will complete the obligations of the project to the satisfaction of the owner of the project as agreed to in the initial contract. The performance bond is meant to protect both parties involved in the project. The Principal, usually the general contractor of the project, is often required to obtain a performance bond to ensure that the project is completed within the framework and timeline agreed upon, and if failure to do so, the obligee of the principal can file a claim against the performance to the surety. The Principal is then required to repay any money that the surety paid out on behalf of the claim made. All claims should be worked out and paid for as soon as possible as to not risk losing licenses, and business in the future. Claims against a surety bond can be detrimental for a contractor.
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