Still, circumstances can always change – projects go over budget, delays may be encountered, work can be hindered due to outside factors and defaults may occur. Contractors are required by the owner or obligee to provide a contract bond – also known as a payment or performance bond or a construction bond – which acts as a guarantee that they abide by the terms of the contract while also guaranteeing that they pay all related subcontractors and suppliers that otherwise may have the ability to lien the project.
Suretyship is a specialized guarantee established between three parties – a principal, obligee and the surety. The surety bond ensures that all of the principal’s contractual and payment obligations are fulfilled so that projects can be finished up to the full terms of the contract while the project is left lien-free. In the case that obligations under the contract bond go unfulfilled, the obligee or unpaid party can claim and collect from the surety. Ultimately, the principal is responsible should a claim be paid by the surety. The obligation to repay the surety is outlined under the General Indemnity Agreement that would be signed by the principal prior to the issuance of the bond.
At The ProSure Group, the Southeast’s leader in contract bonding and surety solutions, we work with our clients to ensure that they receive bonding that they need now and in the future. Whether you are a construction company tasked with building or refurbishing buildings or infrastructure, or a firm that provides services whether it be IT, or computer programming, janitorial, landscaping, guard or food services or personnel services, we can help you with your surety bond needs.
Understanding the different types of contract bonds
There are several types of contract bonds. These all serve the same purpose of protecting the obligee, but are used differently depending on the circumstance:
- Bid Bond: Protects the obligee by ensuring the principal will enter into the contract and provide the required payment and performance bonds if awarded the contract.
- Performance Bond: Ensures the contractor’s performance of the contract and protects the obligee from the ramifications and damages should the contract not be fulfilled under the terms of the agreement.
- Payment Bond: Protects the suppliers, laborers and subcontractors hired by the contractor by ensuring their valid claims will be paid while leaving the obligee/owner with a lien-free project.
- Supply Bond: Ensures that the materials listed in a contract will be supplied in a timely fashion to the purchaser under the terms of the agreement.
- Maintenance Bond: Protects the obligee receiving work from a contractor as it guarantees that there will be no defects in the completed project for a specified period of time otherwise the principal and or surety agrees to correct the defect.
- Warranty Bond: Same as the maintenance bond, wherein it guarantees that a contractor will resolve all warranty issues on materials and work before any warranty expires.
- Completion Bond: Ensures an obligation will be completed under the time specified but with the principal’s own funds. This obligation is unlike a typical Contract or Performance and Payment Bond situation where the contractor/principal will be paid by the obligee to perform the obligation. Subdivision Bonds are the most common type of Completion Bond – whereas the local government may require a developer or subdivider to either complete infrastructure improvements or post a bond that guarantees the completion of the improvements prior to subdividing a sell the lots that are part of the plat plan.
- Construction Bond: Just another name for a Contract Bond or Performance and Payment Bond. Sometimes the Payment and Performance Bond are combined into one bond and as such may be called a Construction Bond or Contract Bond.
Why The Prosure Group is the surety bond provider for you
For nearly 20 years, The ProSure Group has been a key team member with its clients by providing expert counsel and knowledgeable assistance in the specialized area of surety bonding. Furthermore, our easy application process, quick turnaround times, competitive rates and strong communication with our customers set us apart from the competition and establish us as a leading source for all kinds of surety bonds.