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Understanding surety bonds

On Behalf of | Oct 24, 2016 | Uncategorized

Construction companies in Missouri might wonder what bonds are and why it is a good idea for them to have one. Many people and businesses prefer to do business with contractors who are licensed and bonded, and getting a bond is a necessary part of the licensing process.

A surety bond is not the same thing as insurance. When a contractor gets a bond, it is making an agreement with a surety company. The surety company then agrees to represent the contractor before the licensing board and to guarantee the contractor’s contractual obligations will be fulfilled as called for by the contract. This helps to protect the contractor’s clients, making them feel more comfortable that the work will be completed in a satisfactory manner.

Bonds are required for government contracts. In addition to a license bond and a performance bond, the contractor needs bonds for all steps of the process. The bonds protect the contractor’s client and not the contractor’s business, however. This means that it is important for contractors to also obtain insurance in the event a contract dispute and litigation subsequently arise.

When there are construction defects, the contractor’s surety bond should help to make certain that another contractor will complete the repairs and job as called for in the original contract. This can help to provide clients with peace of mind. When a contract breach results in financial losses, the injured party might want to consult with an attorney who may be able to recover damages through negotiation. If the breach is severe enough that the contract’s heart is destroyed, the attorney may work to recover compensation by taking the matter to court.