Pre Qualified Contractors
Principal's skills are verified by the surety company before the issuance
of surety to the obligator. Before the issuance of the surety to the contractor,
the surety company verify that the contractor satisfy all requirements of the
contract. The surety will be in a position to undergone the risk, In default
of the contractor. The surety has to undertake the performance or the payment
of the obligee in failure of the contract. In such a situation, the surety pre
qualify the requirements of the contractor in a thorough and rigorous manner
and also see to that, the contractor will satisfy the needs of the surety. This
prequalification is rigorous process.
The contractor is required to satisfy the following requirements.
• He should have the ability to meet the obligation of the contract.
• He should ensure the obligee, that he will give a faithful performance
of the contract.
• He should procure good reference and reputation in the market regarding
his contract business.
• He should have proper financial capability regarding his economic soundness.
• Has per the assurance he has to fulfill the performance of the contract.
• His book should show financial soundness of the company for the past
few years.
Bond Benefits
Bonds play a major role in today's market. Bonds become more essential
in construction industry for completion of their construction projects. Underwriting
bonds involve great risk. But the surety company will write these bonds for
the benefit of their customers. If bonds have been underwritten it has following
benefits.
• The obligee gets a guaranteed performance of the contract from the
principal and the surety.
• These bonds enforce the contractor to complete the contract with in
the stipulated time and contract money.
• This bond guarantees the payment from the obligee to the contractor
and also from the principal to the subcontractor.
• This bond ensures that the supplier will furnish the material and labor
to the principal as signed in the contract.
• In default of the contract, the obligee can sue the principal i.e. the
obligator and the also the surety.
• The obligee can enforce the surety to complete the contract with in
the stipulated time and contract money in failure of the principal for completion.
• The underwriter of the surety company can provide financial, technical
assistance to the contractor.
Contractor
A contractor is a person who undertakes the risk of completion of contract with
in stipulated time and contract price. The contractor performs a contract for
a price consideration. The contractor guarantees the owner that he will finish
the contract with in stipulated time and contract value, through issuance of
the bond. In default of the contractor, the obligee will sue him against the
court of law. This bond ensures the contractor's guaranteed performance
of the contract.
Oblige
An oblige is a person who receives the benefit of the surety bond. The obligee
is said to be the owner of the contract and he receives the performance of the
contractor. The obligee makes payment to the contractor for completion of contract.
In failure of the contract, the obligee can sue the principal and the surety
against claims. The owner can ask the surety to complete the contract, if principal
failed in his performance.
Surety
A surety is a guarantor for the performance of the principal against the contract.
The surety undertakes the risk by guaranting against the principal. The surety
enforces the contractor to perform the contract, in failure of the principal.
The obligee can sue the surety for the failure of the principal's performance.
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