The Financial Fallout from a Terminated Contract

Nina Conner News

Posted by Arthur Sonneland, for OldRepublicSurety

No one wins — the principal, the obligee or the surety — when a principal is terminated on a bonded project. A termination will generally require the surety to step in and 1) find another contractor to complete the project, 2) complete the project itself or 3) offer a financial settlement to absolve itself of future liability on the project.

For this post, we’ll discuss the surety finding another contractor to complete the project or completing the project itself. When either of these happens, there is significant fallout that can financially impact the principal, the obligee and the surety. The principal will be required to reimburse the surety for any amounts paid, to a completion contractor or the obligee, and the surety’s costs and expenses related to termination.

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