A contractor bond is designed to ensure that a project is completed regardless of what happens with the contractor. If the project is not completed, its owner can file a claim and receive financial compensation for the loss that he or she suffered. As a contractor, you want to avoid having a claim filed against you. A claim could result in serious consequences and even put your business in danger. To help you avoid this, here are some ways you can potentially avoid a claim.
Negotiate With the Project Owner
Sometimes, there are circumstances that are out of your control that result in a project not being completed. Even though you could not avoid the situation, the project owner can still file a claim against you. You could possibly prevent this from happening by negotiating with the owner.
Negotiating is not a requirement and depending on the relationship you have with the project owner, it could prove to be extremely challenging. However, negotiating with the owner to complete the work or refund some or all of the money paid towards the project to this point is preferable to facing the bond company and its attorneys.
Know Your Contract
One of the most commonly cited reasons for claims to be filed is breach of contract. Whereas the project owner might feel you did not fulfill the terms of the contract within the time period stated, you might disagree. Therefore, it is important that you read and understand your contract.
If there is a breach of contract dispute, you might be able to reason with the project owner. For instance, if you did not default according to the contract, you could point this out to the owner. He or she might have claim against another party, but you could be in the clear.
Keep Detailed Records
Even if you do not believe there is a chance that your contract with a project owner could result in a claim being filed with the bond company, you still need to keep detailed records. The records could be instrumental in proving that you held up your side of the deal and that you were not at fault if the project is not completed on time.
The documents you need to keep include any written communications between you and the project owner, receipts, checks, and other related items. You also need to keep a phone log to note each time you and the project owner spoke with each other by phone.
Contact your contractor bond service to learn of other ways you can avoid a claim.