Subcontractor's Performance Bond
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How to fill out Subcontractor's Performance Bond?
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FAQ
A subcontractor performance bond is a project-specific agreement between the GC, the subcontractor, and a surety company (similar to an insurance company). It will typically be required by the construction contract. The performance bond ensures that the sub's work will be completed on the project.
A subcontractor performance bond is a project specific contractual agreement between a subcontractor and a surety by which the surety guarantees to arrange for the completion of a subcontract if the subcontractor runs into trouble and fails to complete its scope of work on the project.
In order to get a performance bond, contractors must usually pay a premium on the bond amount as well as interest on the bond. Again, the price will depend on the cost of the bond and the risk (creditworthiness) the principal presents. In most cases, you will first need to obtain a bid bond before bidding on a project.
The Performance Bond secures the contractor's promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed. The Payment Bond protects certain laborers, material suppliers and subcontractors against nonpayment.
A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract.A performance bond is usually provided by a bank or an insurance company to make sure a contractor completes designated projects.
A performance bond is a bond that guarantees that the bonded contractor will perform its obligations under the contract in accordance with the contract's terms and conditions. Performance bonds are typically in the amount of 50% of the contract amount, but can also be issued for 100% of the contract amount.
This may mean that if the contractor is incapacitated to complete the job, the client suffers a financial loss and cannot be covered. It is also impossible for the investor to place a claim to any company for the loss incurred. Therefore, bonding indemnifies the owner of the project against such.
Unlike prime contracts, bonds typically are not required for subcontracts by law on public works. Instead, each general contractor decides whether to require their subcontractors to bond.
You will need to be bonded if your state or municipality requires it. In addition, if your business frequently performs services in customer's homes or on the premises of other businesses, you should strongly consider getting bonded to protect your customers and your business's financial health.
