Safeguard Your Business When Entering a Contract

Entering a new construction contract comes with a lot of uncertainty and risk. Have you taken the steps necessary to protect your business from any potential financial risks?

An effective way to do this is by getting a surety bond. A surety bond is a three-party agreement between the contractor, the owner, and a surety company, which ensures that the contractor fulfills their obligations. If the contractor fails to meet the terms of the contract, the surety company is responsible for compensating the project owner, which provides a safety net for both parties involved.

Here's a list of ways that you can prepare yourself ahead of time and avoid entering a bad contract:

• Research, Research, Research!: Start by thoroughly researching the owner's background and previous projects. This can include looking at their online reviews, asking for references, and consulting with other contractors who have worked with the owner before.
• Get It in Writing: Ensure that all expectations and agreements are clearly outlined in a written document, including the scope of work, timeline, budget, and payment terms.
• Use a Standard Contract: A standard contract provides a layer of protection, as these often include fair and balanced terms for both parties.
• Watch For Red Flags: Pay attention and look out for red flags. Do they have a history of litigation or delayed payments? If so, consider these heavily before proceeding.
• Consult a Legal Professional: Allowing someone who specializes in construction law to review any contracts before signing, can help alleviate any concerns you may have. They can help identify potential issues and suggest amendments for better protection.

If you find yourself in a situation with a problematic owner, document everything and communicate in writing. A paper trail will be a lifesaver if you enter mediation or arbitration.

If a dispute arises, having a surety bond in place can be invaluable. The bond reassures the project owner they will be protected if the contractor fails to fulfill their obligations. For the contractor, it demonstrates financial reliability and commitment to the project, which is beneficial in maintaining a good industry reputation.

Our surety professionals at AssuredPartners provide exceptional support to clients nationwide for their various surety needs. Contact our team to learn more.