Construction Bond Glossary
Construction Bond | Bid Bond
Bid Bond: Guarantees the obligee that the construction company will honor its bid. Usually required by contractor before bid takes place.
Construction Bond: Guarantees required before construction company is allowed to bid or is awarded a large construction project. This financial guarantee assures that the bills for the construction project will be paid. Three types of construction bonds are: bid bond, payment bond and performance bond.
Financial Guarantee: Consists of cash deposits, payments, surety bonds, or other irrevocable agreements that guarantee the construction of structural measures.
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Individual Sureties: Individuals may act as sureties to satisfy bonding requirements on federal projects if they have certain acceptable assets in the required amounts to support the bonds.
Payment Bond: Guarantees that all sub-contractors and suppliers receive payment for the products and services they provided on the construction project.
Performance Bond: Guarantees the construction company will complete the contract according to its terms including price and time.
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Risk Management Company: A company that manages the risk of others using a variety of instruments such as bonds and financial guarantees.
Surety Bond: A surety bond is a guarantee, in which the surety guarantees that the contractor, called the “principal” in the bond, will perform the “obligation” stated in the bond.
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This page is not meant to provide conclusive legal definitions of construction surety bonds.
It is only to serve as a reference by which you may conduct further research
into the legalities of construction surety bonds. The contents of this web
site are subject to change / revision without notice.
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