Construction Contractor Bonds
A construction contract bond guarantees contractors meet the obligations of the project contract. Construction projects commonly require these types of bonds, which are also known as construction surety bonds or contractor bonds.
Owners use bid bonds to pre-qualify contractors that submit proposals for construction project contracts. Contractors using bid bonds are able to show they’re guaranteed for the bid amount and ready to post the appropriate performance bond when they win the contract.
Contractors guarantee their adherence to contract terms and performance with a construction performance bond. A performance bond also protects the owner from financial loss if the contractor breaks the contract.
Payment bonds guarantee the contractor’s obligation to pay subcontractors, laborers, and material suppliers required by the project’s contract. Essentially, the contractor uses a payment bond to guarantee that they’ll make all payments required even if they default. Public construction jobs can’t place liens, so a payment bond protects labor or materials suppliers on a public job.
Contractors use maintenance bonds to guarantee that they will remedy any defects or provide the owner with compensation for any defects that may have occurred during the construction project.
Mandatory public improvements require a subdivision bond to guarantee the project’s successful completion. Local authorities require subdivision bonds from landowners as a guarantee. A subdivision bond obligates the completion of subdivision improvements by the principal and the surety.