Surety Bonds

A maintenance bond is a contractual agreement between a contractor and a project owner, designed to address any defects that may arise. It stipulates that the contractor will correct any defects, or that the owner will be compensated for those defects.

If a contractor is bidding on a construction job, or a similar bid-based project, a bid bond provides a guarantee to the project owner that the bidder will take on the job if selected.

Retention is a practice wherein a portion of the amount due to a contractor is held by the project owner, pending proper completion of a project and remedying of defects.

A retention bond is a contractual agreement that allows money to be paid to a contractor in full, letting them pay subcontractors and maintain cash flow. The bond secures the amount that would otherwise be retained, so that the project owner can still have defects remedied, or receive financial compensation for them. 

A performance bond is a Surety Bond that guarantees satisfactory completion of a project by a contractor.

Some projects will require a project owner to make an advance payment to a contractor, particularly if the contractor incurs significant start-up costs before the work begins (such as ordering expensive materials or equipment).

In these cases, an advance payment bond will cover the project owner financially, should the contractor fail to meet their obligations. 

If a project owner has made payment for materials that are held away from the building side – for example, if they’ve pre-ordered certain expensive materials – an off-site materials bond secures that payment. If a contractor defaults on the work, the bond ensures that compensation can be paid to the client who holds the bond.