This may be a requirement if you are bidding for a local government contract, for example. It represents a commitment, should your bid be successful, that you will carry out the work.
Who are they for? Contractors tendering for public works.
Retention Bonds
Who are they for? Main Contractors, Sub-Contractors.
Beneficiaries will often hold back money on a contract as security against any defects that need to be made good. That withheld money can be a serious hindrance to the contractors cashflow and operations. A retention bond can alleviate this difficulty – the Beneficiary waives their right to deduct retention money in favour of security in the form of a retention bond. In the event that defects are not rectified prior to the contract termination, the beneficiary can claim for the cost against the bond.
Performance Bonds
Performance bonds guarantee that the Bonded Principal will undertake and fulfil their contractual obligations agreed with the Beneficiary.
In the event of contractual default (usually via insolvency of the Principal), the Beneficiary will hold security in the form of the bond which will reimburse and pay out losses and damages up to the maximum bond amount.
Who are they for? Main Contractors, Sub-Contractors, Service Providers.
Warranty and Maintenance Bonds
Warranty & maintenance bonds provide security to the Beneficiary for any defective works or faulty materials which may be discovered post project handover, during the maintenance period. Maintenance bonds will either be incorporated into the contractual performance bond that would usually reduce by 50% on practical completion or they will be issued as a standalone bond which replaces the contractual performance bond as a lesser sum.
Who are they for? Main Contractors, Sub-Contractors.
