What is a contract bond and when is it required?

A contract bond is an agreement between a contractor, a surety company, and the party requiring the bond. It is designed to provide financial protection to the obligee (the party requiring the bond). In California, a contract bond may be required in the construction industry when a contractor or subcontractor is hired to perform a project. The contract bond guarantees that the contractor will follow all applicable laws, regulations, and contractual obligations. It also ensures that the contractor will pay any money due to others who have provided labor or materials for the project. For example, if a contractor fails to pay a subcontractor, the surety company would pay the subcontractor up to the amount of the bond. When a contract bond is required, the amount can vary depending on the type of project and the amount of material and labor involved. Generally, the contract bond is included in the binding contract between the contractor, the obligee, and the surety company. The contract bond ensures that the contractor meets the terms of the agreement and pays any debts associated with the project. In California, a contract bond may be required for any construction project that is valued more than $25,000. The surety company will review the contractor’s financials, credit report, and work history. If approved, the surety company will issue the bond and the contractor can begin work on the project.

Related FAQs

What is a construction claim and how is it processed?
What are the legal remedies available when a contractor fails to pay?
What is the role of a construction law attorney?
What are the legal remedies available when a construction project runs over budget?
What are the legal requirements for payment bonds in construction contracts?
What is the appellate process for construction disputes?
What are the rights of an owner when a contractor fails to perform as promised?
What types of waivers and releases are used in construction contracts?
What are the most important issues related to construction law?
Is design-build a form of construction contract?

What is a contract bond and when is it required?

Related FAQs

Related Blog Posts