The bid bond accompanies a tender and guarantees the owner that if the contractor is the low bidder, the contractor will honour that bid, sign a contract to do the work and provide any further bonding that’s 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.
Surety letter (consent of surety)
A tender often calls for a surety letter or a consent of surety from the bonding company to accompany the bid bond. The consent of surety guarantees that the bonding company will provide the specified bonds to complete the contract.
A performance bond guarantees the owner that the contractor will perform the contractwork. If the contractor does not, the bonding company must make arrangements to complete the project or pay out the bond penalty.
Labour and material payment bond
A labour and material payment bond ensures that suppliers of labour and material used on a project and covered by the bond will be paid.
We can provide a full range of bonds including Contract Bonds, Surety Bonds, Fidelity Bonds etc.
A bond is a three-party agreement and usually is a guarantee that first party, the Surety will meet the obligation due to the second party, the Obligee, from a third party, the Principal, if the third party does not meet its obligation. The bond will protect the Obligee.
Types of Bonds
- Bid Bond: During the bidding process, bid bonds may be purchased. They are a guarantee to the project owner that states that the contracted company is capable of completing the project as specified in the contract if they are selected. A bid bond can also determine that the contracted company must provide any further bonding that may be required to fulfill the contract to the project owner’s conditions. If the contracted company fails to finish the project, they must then compensate the corporation or individual who requested the bond. The amount is normally the difference between the contracted company’s bid and the next lowest bid. If the contracted company refuses to comply, the bonding company will provide the amount owing.
- Performance Bond: A performance bond is a guarantee that the contracted company will perform the specified work to the requirements of the job owner. It may me requested by the job owner or a corporation or the individual with holdings in the project. A performance bond ensured that if the contractor does not meet their obligations, then the insurance company providing the bond must make arrangements to complete the work or pay out the penalty under the bond.
- Labour & Material Payment Bond: A labour and material payment bond ensures that suppliers of labour and material used on a project will be paid.
- Licence & Miscellaneous Surety Bond: For activities and projects that come under the jurisdiction and regulation of government authorities – such as providing contract work for the provincial, municipal or federal government – often businesses will require that a bond be posted before granting an individual or a corporation to engage in the required activities. The expectation of these bonds is that the applicant will carry out their commitments rather then suffer personal monetary loss.
- Service Bonds: Service bonds cover situations where a business owner is required to provide a bond to a third party guaranteeing the performance of services and ensuring such services are provided and that the third party does not suffer a loss due to dishonesty or the business owner or its employees.
- Administration or Fiduciary Bonds: These types of bonds are necessary when a court appoints a representative to manage the estate of the deceased in the case that there is no known will. A bond is also required when the court appoints a representative to administer the trust of an infant or minor or to administer the affairs of a mentally challenged dependent adult.
- Lost Securities Bond: A lost securities bond enables a person to access copies of valuable documents lost or destroyed in a named peril such as fire, flood, tornado, etc. The bond is presented to the bank, insurance company or the corporation that first issued the lost or destroyed document.
- Employee Fidelity: Blanket Position Bond: A blanket position bond covers the fidelity for a specified limit on an employee holding the insured position in an organization. The bond automatically covers the new employee holding the insured position and ceases when an employee is no longer employed.
- Named Scheduled Fidelity Bond: Named scheduled fidelity bond provides coverage on employees named on the bond. Unlike blanket position bond, this bond lists the name and position of each employee and the amount for which each is bonded.