Types of Bonds/Surety:
Bid or Proposal Bond
This is required in connection with the submission of tender for contracts with public authorities and private owners to guarantee that the bidder (contractor), if awarded the contract, will enter into the contract and finish the prescribed Performance Bond. The surety is generally responsible only for the difference between the bid of its principal and that of the contractor who is finally awarded the contract. If the bid bond, however, is a forfeiture or penalty bond, the whole amount of the bond is forfeitable regardless of the difference in bids.
Performance Bond
- This is required of a contractor to guarantee the full and timely performance of the contract according to plans and specifications.
Advance Payment Bond
- If the obliged (owner) is financing a contractor through an advance payment of the contract, he may secure the repayment of the advance by means of an Advance Payment Bond. The amount guaranteed decreases in accordance with the fixed percentage in the monthly bills.
Labor and Materials Payment Bond
- This bond guarantees that the contractor will pay all the bills incurred in connection with the use of labor and materials required in the fulfillment of the contract.
Warranty Bond
- This guarantees the completed works during the maintenance period, generally one year, against defective workmanship or materials.