A surety bond assures the contractors, clients or investors that the contractor will perform the contract to completion, or if they fail their responsibility, the funds will be availed for another contractor to do the Job. Contractor bonds, therefore, protect against loss and poor artistry. Hiring unbounded contractors may come with several bottlenecks. Let us discuss them below.
Unbonded contractors may signal a weakness in financial capability to perform their mandate to completion. 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. Here are some of the risks of hiring an unlicensed unbonded contractor.
Risk of Non Bonded Contractor
Secondly, non-bonded or uninsured contractors may pose the risk of poor performance of the contract. It is possible that uninsured contractor may not possess the requisite skills to do the job as stipulate in the terms and conditions of the contract. In other words, the investor stands to risk losing the whole project or receiving substandard service. If this happens, then the investor loses the right to have the work redone at the cost of an insurer. This is because your state contractor board will be reluctant in helping you make a warranty claim against an unbonded contractor. Even if you take the case to a civil court and win, there are chances that the contractor will not be able to pay.
Risk for Investors
As an investor, you risk being liable for payments owed by the contractor to the subcontractors in case they are not bonded. This is true if the non-bonded contractor refuses to pay the suppliers and subcontractors. This will mean that you will shoulder all the obligation to pay all the contractors and their associates all their dues. On the other hand, should an accident occur at your premises, you will completely be liable to pay for all the overhead costs that result from the same.
To avoid contract disputes, you will need a bonded contractor. In most cases, the contractor often disputes the completion percentage, or delay the project, which may lead to holding the part of payment resulting into a tussle.
In general, you are safe only with bonded contractors since you are secured from loss, poor workmanship and non-performance of the contractor. As an investor Always try to check for the right contractor to ensure that they are licensed, bonded and insured, this will go a long way to keeping your reputation.