Question

What are the different types of bond requirement in the construction industry?

Answer 1

solution is attached in the image posted below.

hope it helps.

there are in general three type of bonds in construction industry:

a: bid bond b:payment bond c:performance bond

bid bond:

the bid bond is to protect the owner of project if the bid is not honored by the principal, for example contractor. under the bond owner is obligee and he possess a right to sue the principal and have surety of the issuer ( one who issues bond mainly government or any construction firm) that the bond will be enforced.

if in case the principal i.e contractor refuses to honor the bid then the bond issuer ( insurance company or bank) are liable to the cost which will be spent additionally for contacting second time by replacement of contractor.

payment bond:

it is a guarantee that all the dues that are due to subcontractor and other from the principal will be paid. payment bond benificiary are subcontractor and the suppliers. benefit of payment bond to owner is that it provides a substitute of mechnic's liens(legal document through which one can seek unpaid compensation) if there is non payment of dues.

performance bond:

it is used by contractor or principal so that to guarantee that the contract will be completed in accordance with the term of performance bond.

if in case the principal(contractor )defaults, then then owner can call upon surety of contract and then surety will have to either give the contract to some new contractor or owner is to be paid for completion of contract.