The Benefits of Contract Bonds
Contract bonds (also known as construction bonds) are required in most jurisdictions. A lot of times the benefits are overlooked and they’re seen as a hassle. But in fact, contract bonds provide essential guarantees to both parties involved in the contract.
Contract Bonds Provide Value to Clients:
They ensure the original bid.
A bid bond is a type of contract bond that guarantees a contractor will stick to the terms they originally bid. This type of surety bond is submitted along with the bid, guaranteeing the entire process, from start to finish.
They require the contractor to accept responsibility for mistakes.
We all know a project can require maintenance even after it’s complete. A maintenance bond serves as a warranty against defective materials or shoddy workmanship. Maintenance bonds are not always required, but it’s never a bad idea to protect your company from sticky situations once the contract ends.
They provide the contractor with a backup if it defaults.
If your contractor defaults, a payment bond will make sure everybody involved in the project gets paid and you don’t get saddled with that debt.
They guarantee that the client performs the work according to contract.
This is where a performance bond comes in. It’s another required bond that you’ll be happy to have on your side should the unfortunate event occur that the contract is not carried out correctly.
Contract Bonds Provide Value to Contractors:
The client feels safer and more assured.
Being backed by a contract bond provides a level of assurance to the client that the contract will be honored. Having this financial guarantee will help facilitate a better working relationship.
They guarantee completion of the project.
Sometimes you get near the end of a project and realize your company simply doesn’t have the resources to complete it. It happens to the best of companies, but you still want to see the project completed and know that all your hard work didn’t go to waste.
They provide assurance for subcontractors and vendors.
As you’re gearing up for a project, the best subcontractors and suppliers may want to see proof that you are holding a bond. It also serves as an assurance to them that they’ll receive their due compensation.