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What does the Bondability letter accomplish?

The letter of bondability at best shows a perspective owner that the contractor has a relationship with the surety company. Frustrated obligees have sued sureties over the letters because they would not furnish the bond later to no avail.

The following is an excerpt from a letter:

If Contractor is the successful proposer and is required to provide performance and/or payment bond(s), we would consider executing the required bonds on their behalf.

Our consideration would be based on the satisfactory completion of our normal underwriting requirements, which include, but are not limited to, our satisfactory review and approval of the contract terms and conditions, our contractor’s financial condition at that time, his overall work program, verification of project financing and other pertinent underwriting criteria. Please be advised that the execution of any bond or bonds is a matter between the contractor and us. We assume no liability to you or any third party in providing this letter.

One can see that there is very little to actually obligate the surety to write a bond. The language above is contained in some form by every surety company’s bondability letter.

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2 thoughts on “What does the Bondability letter accomplish?”

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