This construction bond is the title given to a kind of surety bond that has been made to come into use by investors in projects related to construction. This step has mostly been taken to provide a certain kind of protection against a very severe kind of event taking place that can cause a certain kind of hindrance or failure in the completion of the project, the reason behind it being the insolvency of the builders or the inefficiency of the job to meet ends with the specifications of the contract.
Usually you will notice the existence of three kinds of parties in a construction bond, namely they are the party that has a hand behind the building of the project, the eventual owners and then finally you have the surety company that has got the back of the bond.
As for the types, this kind of bond contains three types; let us have a look at the list:
• THE BID BONDS
In situations where as the expected honor and respect for the bid by the principal which in this case might be the contractor is not met, this bid bond comes into the picture where it provides protection to the owner of the project. The obligee held under the existence of this bond in this case is the owner and he absolutely has the rights to sue the surety and the principal if he wills to in order to establish the enforcement of the bond. In case the principal refuses to extend any kind of honor to the concerned bid, then he takes the responsibility of being liable for any kind of additional costs that might surface.
• THE PERFORMANCE BONDS
This performance bond is used to provide a kind of assurance or rather guarantee by the contractor or the principal. This guarantee talks about the completion of the contract in full accordance with its respective terms. IF under any circumstances, the principal is seen to be facing defaults, the owner holds the right of calling upon the surety to ensure that the contract meets its completion. In that case, the surety will have no other choice but to hand over the contract to a new designated contractor.
• THE PAYMENT BONDS
This is the kind you head to when you need all your payments to be guaranteed, the payments that have been lying under the due tag to subcontractors and some other from the mentioned principal. The subcontractors and the suppliers are the ones who qualify as the beneficiaries for the payment bond. This bond proves to be of a tremendous benefit to the owner especially, the reason being that it comes as a substitute to the mechanic's liens as a non-payment remedy.