Posted by Kelly Kimmel, OldRepublicSurety
There is a saying in the construction surety world: “Contract is king.” If your contract and bonds end up in a litigation setting, courts tend to hold the surety to the contract over the bond forms. Performance and payment bonds, by their nature, carry out the terms of a contract and therefore are inherently attached to it. This important connection has made underwriting the contracts that are being bonded a large part of the surety bond underwriting process. Most brokers have created a bond-request form, which requests a high-level outline of standard terms within the construction contract. These terms generally include damages, payment terms, and warranty period. Over the next few articles, I will be outlining why we, as surety professionals, zone in on these specific terms and how contractors can use them to mitigate their risk.