ARTICLE · 10 FEBRUARY 2023

Surety Bonding On Construction Projects: The Basics

Thompson Dorfman Sweatman LLP

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Consideration of whether a bond is appropriate in your construction project will require an analysis of how risks are to be allocated between the owner and the contractor.

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Consideration of whether a bond is appropriate in your construction project will require an analysis of how risks are to be allocated between the owner and the contractor. Generally, provision of a bond will protect the owner in the event that a contractor defaults on its obligations. While a bond may not be appropriate in every circumstance, this article will provide an overview of the basic types of bonds in the construction industry.

What is a Surety Bond?

A surety bond is one method to share risk under a construction contract. Most commonly, an owner will require the general contractor to obtain a bond from a surety in the event that the contractor defaults on the contract. If the contractor fails to perform its obligations, the surety effectively assumes the obligation of the contractor. A surety will complete due diligence regarding the contractor before issuing a bond, and will typically look to the contractor's historic performance and

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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