Construction Bonds

Written by Michael O'Brien
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There are many types of construction bonds that fall under the category of the basic contract bond. These include performance, bid, payment, and supply bonds. When dealing with construction in particular, there are a quite a large number of variables that need to be taken into account.

Different Construction Bonds

One type of the most common types of construction bonds is what's called a subdivision bond. These involve mandatory changes or improvements property owners must make to the buildings or landscape they own. The purpose of such bonds is to provide legal protection. Depending on local laws, the project will cost only a certain amount and no more, or will cost nothing to the property owner. The bonding process guarantees this by absorbing excess costs should they occur.

Obviously, it is within the best interests of surety companies who distribute contract bonds to not have to pay for shoddy workmanship, legal fees, or over extended costs. The bonding process is a means of guaranteeing the contractor doing a job is reliable. They would not be bonded if they weren't.

Other Considerations

Construction bonds fall into another category. Basically, some construction projects require that only bonded contractors be employed. This is a way of not only protecting an individual from financial loss, but also in protecting public funds from the same. Local governments must adhere to scrupulous regulations regarding the proper use of taxpayer money. Raising taxes to make up for a public construction project that failed or was more expensive than a building contractor promised is not an option.


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