Surety – Contract Performance and Commercial Bonds
Surety bonds are available to cover different parts or phases over the life of a construction contract. The purpose of
surety bonds are to provide the principal client (project owner) with a level of financial compensation in the event of the default or failure of a contractor under a construction contract.
There are a range of bonds available to contractors to meet a number of contract requirements include:
- performance bonds
- maintenance bonds
- bid bonds
- retention bonds
- advance payment bonds, and
- off-site materials bonds.
Surety bonds are designed for:
- general builders
- civil, heavy and specialist engineering
- manufacturing, and
Set up by contractors for the benefit of their customers or potential customers (‘the principal’), Contract Bonds provide security against default or non-performance. When compared with a bank guarantee, they have the advantage of not tying up working capital or lines of credit.
Contract Bonds include:
- Bid Bonds are submitted with a bid or tender to ensure that your client will actually enter into a contract if their bid is accepted. A Bid Bond also guarantees that a performance Bond will be supplied.
- Performance Bondssupport the contractor's obligations during a contract period providing security to their customers against default or non-performance.
- Advance Payment Bonds serve to secure the principal's position where funds are advanced to your client for the purposes of the pre-purchase of equipment or site establishment.
- Retention Release Bonds provide security to the principal where funds are advanced to your client from the retention fund.
- Maintenance Bonds secure your post-completion obligations during the warranty or latent defects period, usually 3 to 12 months post-completion.
- Off-Site Material Bonds cover the principal in respect of goods or materials produced and held off site and paid for by them. The Off-Site Materials Bond responds where the goods or materials are not available when required for incorporation into the contract.
Commercial Bonds cover regulations and commercial contractual obligations and include:
- Residential Deposit Bonds provide a convenient way to secure residential (home or investment) property without having to release capital.
- Commercial Deposit Bonds provide a convenient way to secure business (office, industrial or retail) property without having to release capital
- Lease Performance Bonds issued at the request of a tenant in favour of their landlord and provide financial protection in lieu of a security deposit on a lease agreement.
- Probate/Transfer Indemnity Bonds provide a fast and inexpensive way to release assets from a deceased estate without having to obtain a grant of probate.
So call CPR Insurance Services for more information or assistance if you need to obtain any of these Bonds.