By Lowell A. Westersund and Barbara E. Cotton*

At one time the use of sureties in construction contracts was viewed by owners and contractors as a mere formality in the process of negotiating their legal relationship. Those days are gone. In today’s economic climate of recession, with its attendant insolvencies, the use of sureties to provide construction bonds has become a very important part of the process.

The major advantage of construction bonds is that they provide the owner, as well as subcontractors and material men, with the alternate remedy of claiming on a bond should the contractor run into difficulties. This remedy is often the most expeditious one when contrasted with other remedies such as claims under the Builders’ Lien Act. Claims are most often made on construction bonds when the contractor runs into financial difficulties. An additional advantage of claiming on a construction bond, therefore, is that it allows a claim against the party most likely to have “deep pockets,” the surety.

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