Are performance bonds typically capped at the value of contract? Who pays the delta if a subcontractor defaults and it takes $100000 more to complete the work by others.
Hello,
My understanding is performance bonds can be for whatever amount you want but you're going to pay for every dollar of the bond value.
If you have a $100K delta someone screwed up badly. Hugely. Massively. Performance bonds are carefully calculated to be for the project value because if a sub or someone quotes $20K, that piece is expected to come in at or around $20K. If they walk, the performance bond guarantees that there will be money in the project to pay the next person to pick up the matter from where the last guy left off. But at the point where the delta far exceeds the amount of the piece of the project that was supposed to be completed, there are major issues.
The bonding company is only going to pay up to the value of the bond. The remainder will be on the person who purchased the bond or whoever is otherwise responsible.
E. Aaron Cartwright III
214.789.1354
Aaron@EACLawyer.com