Contract Bond

There are several categories of contract bonds (construction bonds, payment bonds, performance bonds, or subdivision bonds) all of which are three-party agreements between the contractor, owner as oblige, and the surety.

A contract bond is a financial assurance that a contractor will complete a job to satisfaction. If a contractor fails to complete a job as expected, the agency which issued the contract bond will provide a pay out to compensate. In many regions of the world, contractors must be bonded in order to obtain a contractor's license, and consumers should always take care to use the services of a bonded and licensed contractor to ensure that work will be completed to satisfaction.

Contract Bond provide financial protection in the event that a particular job is not performed as desired. If a contractor walks off a job or fails to complete it, the contract bond would cover this. A contractor's contract bond also covers things like unpaid suppliers or subcontractors, damage to the property caused by the construction, and lost or stolen materials from the site.

For contractors, a bond is a valuable tool, because contract bond assures clients that they will be protected financially in the event that there is a problem with the job. Clients prefer to work with contractors who hold contract bonds as a form of financial assurance, and subcontractors and suppliers may like to see proof of a contractor's bond before agreeing to work on a job. Construction can get very costly, especially if things go wrong, making a contractor's bond a critical tool to have. Contractors may also be asked to take out contract bonds for particular big projects, such as government works projects.