Surety bonds

Contract bonds

Bid bond

The bid bond accompanies a tender and guarantees the owner that if the contractor is the low bidder, the contractor will honour that bid, sign a contract to do the work and provide any further bonding that’s required to fulfill the contract. If the contractor backs out, they must compensate the owner for the difference between their bid and the next lowest bid. If the contractor doesn’t compensate the owner, the bonding company must pay out under the bid bond.

Surety letter (consent of surety)

A tender often calls for a surety letter or a consent of surety from the bonding company to accompany the bid bond. The consent of surety guarantees that the bonding company will provide the specified bonds to complete the contract.

Performance bonds

A performance bond guarantees the owner that the contractor will perform the contract work. If the contractor does not, the bonding company must make arrangements to complete the project or pay out the bond penalty.

Labour and material payment bond

A labour and material payment bond ensures that suppliers of labour and material used on a project and covered by the bond will be paid.