A surety bond is defined in practice, as the contract between three parties guaranteeing that a job will be completed in accordance to the contract terms. The three are the project owner who is known as obligee, contractor who is the principal and the surety who ensures the task at hand is completed as per the agreement terms without interference. Surety bonds are more financial related and even though they are very common in the construction industry, they are of different types touching on different areas of agreement. There are many types of surety bonds just like there are many obligations people encounter in business. Below are some of the most common bonds that can make a difference for businesses.
1.Contract bond – This is the ones contractor need especially when bidding on large projects. This is to guarantee that the contractor will complete the work at hand on a stipulated time. It is not always that the bonds are required for contractors but they may be required to present them when bidding on government projects, big projects or when it is request by the customer. Bonded contractors have better chances of nailing large projects. They include bid bond, performance bind and payment bond which together cover the entire project as appropriate as possible. There are many types of contract bond such as payment bond, bid bond, performance bond, supply bond etc.
2. Business bond - this differ from place to place the primary objective of this is to ensure that the businesses are responsible in fulfilling duties promised or offered to clients and also to the government through payment of bills and taxes. Different business categories need the bonds to show that their operations are trustworthy and financially responsible.
3. Court bond – surety bond also come in place in the legal industry. The most common are those that individuals with court cases require from the court to ensure defendants show up in court or to ensure payment as directed. In some other legal instances, legal clients may need bonds to perform different functions line becoming estate executors. The most common are estate bonds, appeal bonds, guardian bonds and injunction binds.
4. Permit and license – This bond is just to show that business owners and workers will abide by local regulations set for the field they are involved in. For example lawyers need to abide by the rules and regulations within their localities and a license bond works as assurance that they will perform their duties as expected.
5. Commercial - These include different kinds of bonds that are not under construction and court surety bonds. The most common include lease deposit bonds, business service bonds and commercial contract bonds among others.
They do come with lots of benefits depending on the field they are designed for. Bonded companies often gain a good reputation and are more likely to be trusted with projects compared to companies that are not bonded at all. If you are a contractor you must of course choose a surety bond provider that you can trust so the terms you abide by are easy for you to keep up with to give you good edge. Those are just few of them currently in operation in the market and there are so many other kinds of surety bonds that are being discovered as day pass by.
A surety bond will increase trust and responsibility, so find a bond that best suit your area of interest today.
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