If you are doing work for a client, they are usually going to want some way of protecting themselves and ensuring that you meet their expectations. This is why most construction contracts are going to have bonding requirements. Bonding functions a bit like an insurance policy, but for your customer. Knowing how these work and what you will need to move forward with a big construction job is important. Our Houston construction contract lawyers can help you with this.
What Does Bonding Do?
When you purchase a bond, you are protecting the customer from a financial loss. You are considered the principal and they are the obligee. The surety company is the one that provides the bond.
When you enter into a bonding agreement, you are telling your customer that you are committing to fulfilling all terms of your contract. If you do not, the bond protects them. Customers like this because it gives them an extra layer of protection. They can always sue a contractor for a breach of contract, but that can be difficult and expensive. Bonding simplifies matters.
This type of bond is often referred to as a performance bond. There are also different types of bonds though, including maintenance bonds, supply bonds, and payment bonds.
Who Sets Rules About Bonding Requirements?
It is important to know that bonding requirements are not set by the state of Texas. The local municipality sets the rules about bonding and controls the process. This means that you could end up facing slightly different processes if you do work in different areas of the state.
Even if the process differs a bit, the requirements are usually similar. You will often need to:
- Provide proof of education and experience
- Enroll in your own liability and workers’ compensation insurance
- Register your company with the secretary of state
- Submit an application form and pay any fees
It’s also important to remember that not every city or town will have construction bonding requirements of its own. In cases like these, it may still pay to get a bond if it gives your customers peace of mind. If it’s the difference between getting a job and getting passed over for a gig, taking the extra steps to get a bond may be worthwhile.
Do Bonds Get Used in Public and Private Projects?
Bonds can be used in all sorts of projects. They are more commonly used in public, government-backed projects, but there is nothing stopping a commercial or residential client from asking for a bond.
Talk to a Lawyer Today
If you have questions about how to legally protect yourself on your next job, contact Patout & Shaw. Our lawyers know the construction industry, and they are ready to help you and your company. Schedule a consultation with our team today.
