Types of Bonds

Question 1

Types of Bonds
1.
2.
3.
4.

Answer 1

Bid Bond
     Liquidated Damages
     Difference in Price
Performance Bond
Payment Bond

Question 2

What is a Bid Bond?

Answer 2

Provided by the contractor to the owner which guarantees that should the contractor “win” the bid for doing the quoted job, that he/she will perform the scope of work.

Question 3

How much does a bind bond security dollar amount range from?

Answer 3

Bid security dollar amounts can range from 5 to 10 percent of the project.

Question 4

In a bid bond, what are liquidated damages?

Answer 4

“Liquidated Damages” if the contractor defaults he/she looses the entire bond to owner.

Question 5

In a bid bond, what is Difference in Price?

Answer 5

“Difference in Price” if the contractor defaults he/she pays the difference in costs related to the next lowest bid.

Question 6

What is a performance bond?

Answer 6

A Bond that guarantees that he contractor will complete the contracted project for the estimate sum. This bond is usually for 100% of the contract sum. Should the contractor default then the bonding company will provide for completion of the project.

Question 7

What is a Payment Bond?

Answer 7

A bond provided by the general contractor usually at the request of the owner/owners agent that guarantees payment to all subcontractors and suppliers by the general contractor. The private owner and the lending provider are therefore protected against property liens.