Rick Case Insurance Agency Blog
The contractor's bond is a strange animal. The bond is a promise to forfeit the money in the bond should the contractor fail to complete the project within the time frame of the contract. In other words, it is a promise to get the job done.
But then why do they need to put up the bond if they are going to suffer a loss of contract and face anyway if they fail to make things happen? Here are some reasons why the Contractor's bond is justified.
Litigation is Expensive and Takes a Lot of Time
In an ordinary contract, a breach of contract will likely result in a lawsuit. Lawsuits take time, money, and cost a lot of stress. Often at the end of bruising litigation, only the lawyers make a profit. Hence if there is a breach of contract, it is often a lose-lose situation for both parties.
The Contractor's bond is a part of the penal clause attached to a contract. It is a form of liquidated damage to be paid to the principal if the contractor is powerless to fulfill his end of the contract. So, it will save a lot of time.
It Shows the Contractor's Confidence
Bear in mind that a contractor's bond is deposited in an escrow account. In other words, it is money that the contractor has no access to from day one of the contracts. In effect, he is depositing a sum of money to show that he is so confident that he can complete the contract within the contract stipulations that he is willing to forgo this money until the contract is completed.
It is the contractor's equivalent of putting your money where your mouth is. So, any worthy contractor is more than willing to put up the bond to guarantee fulfillment of the contract.
The Bond is Not as Onerous as it Looks.
The Contractor's Bond may seem like a lot of money to a layperson, but it isn't that big. As a proportion of the total contract price, it is just a fraction. More importantly, the bond will be released from escrow and returned to the contractor when the task is done to the satisfaction of the principal.
It is just a form of insurance when we consider that the principal shelled out a lot of money and he ought to have some insurance that the contract can be accomplished as per the contract. At Rick Case Insurance Agency, we aim to make our client's life easier with policies that are tailored to their needs. You can get more information about our products and services by calling our agency at (405) 722-5556. Get your free quote today by CLICKING HERE.