Contract Bonds
Contract bonds address a variety of security guarantees required when entering into a contract. These bonds, when compared to bank guarantees have the distinct advantage of not tying up capital or lines of credit which could be used to grow your business.
Put simply, these bonds provide security against non-performance and default.
Contract bonds are established by contractors for the security benefit of their customers.
Contract bond types include:
Performance bonds
These bonds cover a contractors obligations to complete over a contracted period. They provide security for their customers against default or non-performance. These bonds usually extend to practical completion.
Maintenance bonds
Following practical completion these bonds secure the contractors post-completion obligations to attend to defects, warranty or remedial work for a set period of time.
Bid bonds
Bid bonds are used in securing a contractor's obligations to proceed with a contract upon successfully being awarded the project. They can also be submitted with the bid or tender to ensure the client will actually enter into the contract if the bid is accepted. A Bid bond usually guarantees a Performance bond will be provided.
Retention Release bonds
If a Retention Release bond is lodged by the contractor with the principal the contractor is able to receive all progress payments from any retention. The Retention Release bond provides the security required.
Advance Payments bonds
These bonds serve to secure the principals position when a contractor has been awarded pre-payments to cover purchase of plant and equipment or to mobilise or establish a development.
Off-site Material bonds
Used more often with manufacturing and engineering where goods and material are constructed and or held off site when payment to the contractor has already occurred.
The bond responds when the goods and material are not available when agreed.
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