If you’ve never heard of a bond before then you may not immediately understand the connection to insurance. Additionally, a contract bond is not to be mistaken for a contractor’s bond; one that is required for a contractor’s license such as an electric or any other type of subcontractor. In the simplest sense, a bond contract bond ensures that some duty will be fulfilled according to an agreement – usually a written contract.
Contract bonds have a few sub-categories to them.
There are bid bonds, performance bonds, maintenance bonds, and subdivision bonds. In this section we will explain the differences between these types of bonds.
Bid bonds are fairly straightforward. A contractor bids on a project and when he wins the bid the bond is a guarantee that he will enter into the contract.
Performance bonds are an extension of the bid bond. Suppose a contractor wins a bid bond, he will then presumably have to endeavor to complete the project per the terms of the contract. This is a type of insurance that the contractor will finish the project per the terms of the agreement.
A maintenance bond is not extraordinarily different. A property management company can have a deal with a contractor that he will perform his regular maintenance duty to a building per the terms of their contract.
Occasionally the city will require a specific type of bond called a permit bond for a construction project. This is another institution that requires bonds for construction projects, building requirements, and the guarantee that the bond holder has the funds to complete the project within the specified amount of time. Bonds can be renewed, but construction must be finished per the agreement’s terms and there may be penalties within the contract as well.
Regardless of the duty written out in the terms of the contract, Fairfax can help you with all of your contract bond needs. The applications are fairly simple and they provide peace of mind to the party requiring the bond as well as incentive for the terms of the contract to be fulfilled.