In today’s unstable and unpredictable economic climate, surety bonds are
extremely important for company owners who wish to ensure that the legal terms
of their closed contracts and agreements are properly respected by all parties
involved. The practice of establishing surety bonds dates back hundreds of years
ago, when such agreements had the role to increase the safety and efficiency of
long-distance trade. Nowadays surety bonds can take various forms, play a wide
range of roles and are commonly used to secure the terms of major contracts. At
present, surety bonds are extensively used in the construction industry, as
contractors are often obliged to provide project owners a bond that guarantees
the respecting of the terms stipulated in the contract. Sometimes owners are
also required to provide payment bonds to ensure that the suppliers and
construction teams will receive their payment in time.
According to a series of recent studies, the construction industry in the US is
a 445 billion dollar business that includes around a million contractors, up to
70 national contractor agencies and associations, and more than 7 million
workers. Elaborate market investigations recently conducted in the US have
revealed that over 60,000 contractors in the construction industry failed to
respect their agreements over the last 10 years, canceling public and private
sector construction projects worth more than 18 billion dollars. In order to
prevent major financial losses and an entire succession of undesirable results,
increasingly larger numbers of companies nowadays consider using surety bonds
when closing major deals. In the construction industry and not only, surety
bonds have a crucial role, enabling project owners to minimize serious financial
risks.
Surety bonds generally establish a temporary tripartite relationship between the
obligee (the secured party), the obligor (the principal) and the surety (the
party that is secondarily liable). Suretyships basically require the surety to
undertake the debt of another party (the principal). Although many people still
confuse a surety with an insurer, they are two distinctive notions. Thus, it is
very important to distinguish between suretyship and insurance agreements. For
instance, a liability insurer may pay a third party on behalf of the insured, in
which case the insured is under the protection of the insurer. By contrast, in
case of surety bonds, the surety guarantees the performance of a certain
contractor to the owner of a project, but the surety bond protects the project
owner instead of the contractor.
Since they first emerged 100 years ago, surety companies in the United States
have evolved considerably, nowadays delivering reliable, efficient and
high-quality services. Consequently, surety bonds have diversified considerably
in the last few years, addressing a wide range of risk situations. The two main
categories of surety bonds available today are: contract surety bonds (provide
financial security and construction assurance on construction projects by
guaranteeing to the obligee that the principal will perform the work and pay
subcontractors, workers and suppliers) and commercial surety bonds (guarantee
performance by the principal of the obligation stipulated in the bond). These
two main categories can be further separated in a wide range of subcategories.
A popular subcategory of contract surety bonds is represented by bid bonds
(provide financial assurance that the contractor intends to enter into the
contract at the price bid and provide the required performance and
pre-negotiated payment bonds), while a popular subcategory of commercial surety
bonds is represented by contractor license bonds (contractor license bonds are
imposed by state law in order to obtain a license to form a certain business).
Whether you are interested in closing performance bonds, payment bonds,
contractor license bonds, subdivision bonds, court bonds or various other types
of surety bonds, it is very important to request the services of a prominent,
respectable and reliable surety bond-services offering agency. With the help of
a solid surety bond-services offering agency you will be able to enter in
possession of your desired surety bonds rapidly, with less effort and in
exchange for competitive rates.
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