What is a Surety Performance Bond in South Dakota?
A surety performance bond in South Dakota is essentially a contract between three parties. The first part is the principal, who requires the service or product that is guaranteed by the contractor(s) named on the bond. The second part is the obligee, who needs to make sure that whatever product or service they are purchasing will be provided for them at an agreed-upon price. Finally, there is the surety company which guarantees that if any of these contractors fail to complete their duties as agreed upon within the time frame and for the price stipulated in their respective contracts, then they will pay up to 100% of what was originally promised to be paid out by said contractor(s).
The actual agreement itself can be thought of as a triangle; the only way for all parties to receive their agreed-upon satisfaction is if each point of the triangle is connected. As such, if any one of these three points becomes disconnected (or does not exist at all), then there will be no satisfaction gained by anyone involved.
This type of performance bond can also be referred to as a “contract bond” or simply a “surety bond”. This type of contract is widely used in South Dakota and numerous other states due to its popularity and simplicity.
Other types of performance bonds may include bid bonds to ensure that you get your money back if you are not awarded the project, license, and permit bonds to ensure that you get your money back if the contractor fails to obtain the license or permit needed to complete their job and concession bonds to ensure that you get your money back if concessionaire does not open on time.
Just how much is a Surety Performance Bond in South Dakota?
Here we have an example request for surety bond information in South Dakota. The industry type is not fully represented and may be helpful to you when quoting bonds in the future. The “effective date” and “expiration date” may help you determine when this particular $100,000 bond would be required again if they need another one in three years’ time.
A contract performance bond is required by South Dakota state laws to ensure that all businesses entering into contracts with the state follow through with their end of the deal. Prior to issuing your bond, We will need to know information regarding your business, including its gross annual sales and net worth.
We’ll also need you to provide us with financial statements for the past three years (if available). Our experts will evaluate this information and make a decision on whether or not we can satisfy the bonding requirements for your business. This is done in order to prevent companies without enough resources from being approved for a bond that they would be unable to pay if it was put into default.
What’s the process to get a Performance and Payment Bond in South Dakota?
Performance and Payment Bond South Dakota can only be issued by insurance companies duly authorized by the State of South Dakota to provide surety business. Applicants for these types of bonds are required to have their contracts approved by the Commissioner before buying a guarantee from an insurer.
In order to be suitable for this kind of bond, your contract should clearly state that its performance cannot be terminated or modified without written consent from the Commissioner. The main purpose of this requirement is to prevent fraudulent practices such as giving one’s self a raise during construction work in order to pay less on future installment payments.
Contractors will file a claim only after they have completely fulfilled all requirements under their contract and submitted a final statement and payment request for project completion. The issuer will review all information presented by both parties and determine whether the delay in payment was caused by the contractor or by unforeseeable and unavoidable circumstances.
The applicant should provide all necessary documentation to support their claims, and they may also be required to attend a conference with both insurer and client along with an independent 3rd party mediator.
How to Get a Performance Bond in South Dakota?
A performance bond is used by the owner of the property that you are contracting to purchase to protect them from any noncompliance or unsatisfactory work provided by your contractor. The owner may require the contractor to provide proof of current and valid liability insurance as part of this requirement.
Many times, if your county requires it, they will also include proof of workers’ compensation coverage as well. Getting this bond may be as simple as asking your contractor for one or notifying them that you will require it before signing off on their contract and beginning repairs/renovations.
Once you sign off on their contract, typically, there is nothing required of the contractor. The bond is in place to protect you, not them. Once it has been provided and proper insurance certificates have been documented, the owner will sign off on this requirement, and your contract can be deemed ready for closing.
Where can I get a performance bond in South Dakota?
A person who rents out real estate may require the tenant to post a performance bond as an added security deposit. A construction company may ask its subcontractors to provide performance bonds or other securities before starting work.
If you’re buying property, your lender will want you to provide evidence that you have adequate funds for closing – this is called “funding” the purchase – and one way is by providing a letter of credit from your bank that shows money available for closing (the funds don’t actually go to the closing; they’re just an indicator of ability to pay.)
If you’re selling property, you might ask your buyer for a letter of credit from its lender.
A developer or landlord may require performance bonds, which protect against tenants and/or occupants who default on rent and/or occupancy payments and leave the premises in shambles.