Contract bonds

A contract is a surety bond that ensures the contractor will work according to the instructions laid out in the contract. In the case that the contractor does not fulfill the obligations in the contract, the bonding company is liable and must pay the owner.

Contract bonds are sometimes referred to as Construction Bond. A construction bond is simply a general term used to describe the many different bond types that make up a construction project contract from start to finish. This is why you will often times hear 'construction bond' and 'contract bond' used interchangeably.

There are seven different types of contract bonds

Bid Bond

Assures the owner of the project that the bidder will do the job if chosen. This bond promotes serious bids and guarantees the owner that the bidder is financially able to accept the job.

Maintenance Bond

This bond guarantees that the work done by a contractor is without defects for a specified amount of time after completion.

Payment Bond

In the event that the contractor fails to pay the suppliers, subcontractors, and workers, this bond ensures that they will be compensated.

Performance Bond

The performance bond ensures that the contractor will complete the project. In the event that the contractor does not satisfactorily complete the project, the performance bond guarantees no financial loss to the project owner.

Site Improvement Bond

This bond ensures that mandatory improvements will be made to a property. Site improvement bonds are much like subdivision bonds except for existing structures.

Subdivision Bond

The subdivision bond is similar to the site improvement bonds except for new structures. This bond guarantees to city or state that mandatory improvements will be made to their property.

Supply Bond

The supply bond is a contract between supplier and consumer that ensures that the supplier will provide materials as defined in the contract.