Why Contractor Bonds Washington Professionals Carry Are So Important To Clients
Every time there is some kind of disaster in a community, that leaves a trail of property destruction, you will find unscrupulous individuals knocking on doors offering to repair homes and businesses. They are generally strangers to the owners, and expect to be paid before any work is done. Public officials warn Seattle, Washington residents to avoid getting involved in what are almost always scams. Along with credibility and reliability, real professionals have contractor bonds Washington homeowners can verify.
A contract bond is not exactly the same thing as an insurance policy. Insurance removes risk from one entity to a third one and compensates any losses incurred by an injured party. A contract bond is issued by a surety company to guarantee any debt incurred by another. Its function is to prevent loss in the first place. There are three parties in a contract bond, the individual hired for a project, the client who does the hiring, and the surety company.
The most common kinds of contract agreements are bid, payment and performance. A bid bond guarantees potential clients contractors will obtain the other two types of agreements once the bids are won. A payment bond guarantees the clients that all suppliers and subcontractors will be paid in full, and the client will not face any liability for unpaid bills. A performance bond assures the clients that the job will be done according to the agreement he or she entered into.
Additional contract agreements include maintenance, supply, and site improvement. Contractors who construct waste management systems, sidewalks and streets in subdivisions must have a subdivision bond to guarantee all work is completed according to specifications.
The Miller Act became law prior to the second world war. It stated that all contractors, who were awarded public works contracts, be required to have a payment and performance bond for any job that exceeded a hundred thousand dollars. Individual states have similar laws regarding public works contracts. These are generally referred to as Little Miller Acts.
Surety companies have criteria that must be met before a bond is issued. Contractors have to show they have a good reputation and have earned the respect of the community. They have to have a history of paying their bills promptly. Contractors must convince the company they have the capacity to do the job and have the financial resources necessary to complete it.
Surety companies don't have much recourse when contractors default. They can attempt to get the client's permission to rebid the project in order to complete it. They might decide it makes sense to fund the current contractors until the project is completed, at which time they will be reimbursed with interest, or they can just pay the client for the loss.
Defaulting on a bond has serious repercussions for contractors. It is hard to get another company to issue the agreements they need to bid on jobs, guarantee payment to third parties, and to assure clients they will perform a job as agreed.
A contract bond is not exactly the same thing as an insurance policy. Insurance removes risk from one entity to a third one and compensates any losses incurred by an injured party. A contract bond is issued by a surety company to guarantee any debt incurred by another. Its function is to prevent loss in the first place. There are three parties in a contract bond, the individual hired for a project, the client who does the hiring, and the surety company.
The most common kinds of contract agreements are bid, payment and performance. A bid bond guarantees potential clients contractors will obtain the other two types of agreements once the bids are won. A payment bond guarantees the clients that all suppliers and subcontractors will be paid in full, and the client will not face any liability for unpaid bills. A performance bond assures the clients that the job will be done according to the agreement he or she entered into.
Additional contract agreements include maintenance, supply, and site improvement. Contractors who construct waste management systems, sidewalks and streets in subdivisions must have a subdivision bond to guarantee all work is completed according to specifications.
The Miller Act became law prior to the second world war. It stated that all contractors, who were awarded public works contracts, be required to have a payment and performance bond for any job that exceeded a hundred thousand dollars. Individual states have similar laws regarding public works contracts. These are generally referred to as Little Miller Acts.
Surety companies have criteria that must be met before a bond is issued. Contractors have to show they have a good reputation and have earned the respect of the community. They have to have a history of paying their bills promptly. Contractors must convince the company they have the capacity to do the job and have the financial resources necessary to complete it.
Surety companies don't have much recourse when contractors default. They can attempt to get the client's permission to rebid the project in order to complete it. They might decide it makes sense to fund the current contractors until the project is completed, at which time they will be reimbursed with interest, or they can just pay the client for the loss.
Defaulting on a bond has serious repercussions for contractors. It is hard to get another company to issue the agreements they need to bid on jobs, guarantee payment to third parties, and to assure clients they will perform a job as agreed.
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When you are looking for information about contractor bonds Washington residents can pay a visit to our web pages online here. More details are available at http://insurewa.com now.
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