Definition of Contractor Bond

A contractor may need a bond.

When someone hires a contractor, it's a big expense. He'll want some sort of guarantee that the work will be done properly. A contractor bond---also called a surety bond---is an agreement in which a third party guarantees the work. It applies for a limited time, and it may be required by law.

Parties

The client is referred to as the obligee. The contractor is known as the principal, and the person guaranteeing the work is called the surety.

Arrangement

With a contractor bond, the surety promises the obligee that the contractor will do the work as agreed. He agrees to takes responsibility if the contractor fails to keep to the terms of the contract by compensating the obligee monetarily, up to a agreed-upon certain sum.

Cost

The surety wants compensation for assuming the risk involved in the contract, and the contractor needs to pay for the bond. The price of the bond depends on the type of work performed. The contractor may buy the bond from a bonding company.

References

• Contractor Bonds
• Washington Law Help: What to Do If You Are Not Satisfied with a Construction Contractor's Work and Want to File Suit Against the Contractor's Bond
• Academy License Center Contracting School: Work Experience Application Requirements