Contractor License Bond
To Start Any Project
A contractor license bond is a legal obligation before the sewer contractor can be issued with a working license. The bond may also be referred to as a surety bond or a performance bond. The requirements for issuance of the bond vary from state to state, but the basics are the same.
Because the contractor is tasked to provide labor, materials and all equipment related to the project, the contractor must be allowed to do this. The permission comes in the form of a contractor's license.
The contractor's license is usually issued by the Contractor's Licensing Board, which is the overall licensing authority for contractors' licenses. In the United States, licensing authorities for the contractor usually fall under the state government.
Why the Contractor should be bonded.
It is a requirement by law that a licensed contractor should be bonded to show that he is qualified of carrying out the works before he is issued with a license to do so. The contractor should obtain a bond to show that he is capable of carrying out the job.
The bond usually serves as protection for all parties involved in the project, and is an assurance for laborers, equipment and subcontractors if any. The bond will be useful when, for example; the contractor has become incapable to pay the wages of the construction workers, or is unable to complete the client's required works or any other violation of the license laws.
It can also cover for material or equipment stolen from the construction site. The bond is usually filed under a bank, a bonding agency or any financial institution which will act as a guarantor.
Contractor's license bonds are issued according to the contractor's licensing category. The value of the bond will vary from one licensing authority to another. The contractor category could be either one of the following:
1. General Contractor – Residential.
2. Specialty Contractor – Residential.
3. General Contractor – Commercial.
4. Specialty Contractor – Residential.
Usually, the bond amount for the general contractors is much higher than that for the special contractors.
The bond should be "current," meaning that it should be valid for the duration of which the contractor has been issued with the license. This can be evidence to the client that the contractor is in good standing with the authorities.
Protection for the Client.
The bond provides financial coverage to the consumer (the client) in case the contractor fails to "make good," good", meaning he fails to meet his end of the bargain. Most usual cases in which the contractor fails to meet his end of the contract is when the contractor does not build the work according to specifications.
In this case, the client can approach the Contractor's License Board and seek a petition for this matter. The client may also go to court to sue the contractor. The contractor license bond, in essence, is some sort of insurance as it helps protect the client against certain conditions. However, it should not be confused with insurance as the two are very different.
As a client, you should seek proof that the contractor is under bond by asking for his bond certificate number.
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