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Generally speaking, a surety bond is a promise that a guarantor (the surety) will pay one party (the obligee) if another party (the principal or contractor) fails to fulfill the terms agreed upon in the contract.
A contract bond is a type of surety bond that guarantees a contract will be faithfully fulfilled according to its terms and conditions. General contractors often use contract bonds in the construction industry to guarantee the owner of the project that the contractor will abide by the promises stated in the contract and pay any subcontractors, material suppliers and laborers specified in the contract.
Bonds are usually required for federal and state government projects. Under the Miller Act (originally known as the Heard Act of 1893,) prime contractors of some federal construction projects must post bonds that guarantee the performance of their duties and payment to their suppliers and subcontractors. The law was passed to prevent irresponsible contractors from taking on costly government projects. It was also believed that the bonding process would increase competition and decrease construction costs. The federal government determines the language to be used in the contract. However, parties in private contracts are free to work out their language and requirements of the contract between themselves.
There are a number of different kinds of contract bonds. Bid bonds assure that if awarded the bid, the contractor will perform all work promised in the contract for the price specified. Performance bonds guarantee the work will be faithfully completed according to the terms stated in the contract. Payment bonds guarantee that all workers, including subcontractors and material suppliers, will be paid for their labor, materials and services used in the project.
Though rare, a major reason for loss under a contract bond agreement is if/when a contractor goes out of business. In fact, the rate of failure of contractors is generally higher than that of other industries.
Simon Insurance Agency, Inc., is the Florida bond company to turn to when you need surety bonds.
Call us today for a free consultation for all types of Surety Bonds including Court Bonds, License Bonds, Probate Bonds and Permit Bonds. Simon Insurance is based in South Florida and serves clients throughout the United States and Florida including Miami, Ft Lauderdale, West Palm Beach, Tampa, St. Petersburg, Cape Coral, Orlando and Jacksonville. We encourage you to browse our website and call or email us today to find out how we can assist and help you