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Contract Bonds

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This type of bond guarantees the performance of the terms and  specifications of a contract. 
Contract bonds consist of three parties:
1)  Principal: the party (contractor) who agrees to perform/fulfill the obligation
2)  Obligee/Owner: the party for whose benefit the bond is written
3)  Surety: the party who issues the bond for a premium

 



There  are several types of contract bonds:
        
Bid Bond  – guarantees that if the bidder is awarded the contract, the bidder will accept the contract and provide the obligee with a performance and payment bond.

Performance  Bond – guarantees that the principal will perform the contract according to the contract price and specifications.
        
Payment  Bond – guarantees that the principal will pay the laborers, suppliers, and subcontractors used to perform the contract.

Maintenance Bond – guarantees that the principal will maintain the equipment and/or products which were installed per the contract.  
      
Supply Bond – guarantees that the principal will supply the goods and services per the contract.


© Tom Brown & Company, Inc. 2012