Bonded contracts should embrace plans and specifications that are contemplated, particularly concerning outside improvements. Maximums should be set on estimated costs. Time requirements should be explicit. No substantial changes should be made without consent of all parties. Bonds Furnished by corporate surety acceptable to lenders, naming contractor as principal, borrower as obligee, and lender as dual obligee.
Penalty is full contract amount.
Independent verification of bonding company should be obtained regarding validity and effectiveness of executed bond. Bond requirements can be waived in case of materialmen but retained when significant labor is involved. Requirement usually dependent on size of loan, location of project, credit worthiness of borrower, and knowledge of reputation through experience. The takeout commitment Analysis of intent of lender - Standby letter is issued for fee only or full intention to fund upon completion. Insistence of buy-sell agreement.