Question

What happens if the contractor makes a misrepresentation to the surety when applying for a bond (e.g., the contractor reports capitals that do not exist)? Is the bond valid if the contractor defaults on a project on which a performance bond was provided to the owner?

Answer 1

A surety bond is required in a contract to prevent financial loss of any party involved in contract in case of any falsehood, disruption etc.

when contactor provides misinformation regarding his financial capacity, his past work records etc. then the contract becomes null and void. a null and void contract is an illegitimate agreement and is unenforceable.

When performance bond is provided to the owner, the owner gets compensation from the agency issuing performance bond and he may review his decision whether he wants to work with contractor or not after assessing his actual capitals and financial strength or otherwise can declare the contract null and void.