Co-written by Chik Wing Hong
Insurance companies and banks frequently act as sureties for the provision of performance bonds required in the construction industry. A typical scenario is as follows:-
A main contractor requires his subcontractor to provide a Performance Bond covering the value of work to be carried out by the subcontractor up to a specified financial limit. The subcontractor approaches his insurer or banker who agrees to stand surety. The terms of the bond are set out in writing and signed on behalf of the insurer or bank. After the building works have been started disputes arise between the main contractor and the subcontractor. The main contractor calls on the bond.
Considerations for the Bond Provider
