Commercial Policy

Bonds

A Surety Bond is a guarantee by the bonding company (surety), to the owner (oblige), that the contract will be fulfilled by the contractor (principal). There are a variety of bonds that a contractor may require in the course of their business such as:
Bid Bond- This type of bond may be required when a contractor bids on a project. It guarantees the owner that if the contractor is selected for the project that the contractor will honor the bid they submitted, sign a contract to do the work and provide any further bonding required to fulfill the contract. If the contractor backs out they must compensate the owner for the difference between their bid and the next lowest bid. If the contractor doesn’t compensate the owner, the bonding company must pay out under the Bid Bond.
Performance Bond- A Performance Bond guarantees the owner that the contractor will perform the work that has been contracted to them. If the contractor fails to do so, the bonding company must make arrangements to complete the project or pay the bond penalty. Performance Bonds should be requested before beginning work on the project.

Labour And Material Payment Bond

A Labour and Material Payment Bond ensures that suppliers of labour and materials used on a project and covered by the bond will be paid.