A construction bond, also known as a contract or surety bond, guarantees that your contract is completed. If the other party in your contract fails to complete their duties accordingly, than you can make a claim on the bond to recover any of your losses. As your construction attorneys in Orlando, we have compiled a brief overview of the different types of construction bonds that are potentially available for your project.
1. Bid Bonds
Bid bonds are set in place to ensure that contractors will submit serious bid proposals. Bid bonds are there to put the project developer’s mind at ease knowing that bidders have the financial stability needed to accept the job. If a bid is chosen and the contractor turns down the job, the project developer will be able to make a claim on the bond to regain the difference between that bid and the next highest one.
2. Payment Bonds
Payment bonds guarantee the correct payment for services if the contractor goes bankrupt while working on the project. The bond amount will be able to repay the subcontractors and suppliers who were working on the project if the contractor is not able to pay them.
3. Performance Bonds
A performance bond secures that a contractor will finish the project in compliance with the contractual agreement. If a contractor fails to do this, the project developer can make a claim on the bond to receive the money and use it to pay for a second contractor to complete the project.
4. Maintenance Bonds
A maintenance bond secures a guarantee against any flawed materials or workmanship for a set time duration following a finished project. If the project is discovered to be flawed during this duration, the bond’s amount can be used to pay for any damages and repairs that need to be made.
5. Supply Bonds
A supply bond guarantees that the suppliers are accountable for supplying materials and equipment, as described in the purchase order. If the supplier does not provide the agreed upon supplies, the bond amount can than be used to compensate the purchaser for their loss.
6. Site Improvement Bonds
Site improvement bonds guarantee finalization of improvements that are made to projects. These bonds tend to be used for renovation projects only.
7. Subdivision Bonds
A subdivision bond requires contractors to build public structures (i.e., sidewalks) in subdivisions, in accordance with local specifications. If a contractor fails to do this, the bond amount can be used to finish the project properly.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.