Contract Bonds

Contract bonds, used in the construction industry by general contractors as part of construction law, are a guaranty from a Surety to a project’s owner (Obligee) that a general contractor (Principal) will adhere to the provisions of a contract.

Also included in this category are:

  • Bid Bonds – guarantees that a contractor will enter into a contract if awarded the bid
  • Performance Bonds – guarantees the contractor will perform the work specific by the contract
  • Payment Bonds – guarantees that the contractor will pay for services, particularly subcontractors and materials
  • Maintenance Bonds – guarantees the contractor will provide facility repair and upkeep for a specified period of time
  • Supply Bonds – guarantee the supply of goods and services

Contractor Bid, Payment and Performance Bonds

At A Better Surety, no job is too big or too small.  We will work to get you set up with the market that is right for you, with the best rate.  We know that time is money, so we will work hard to get your bond placed as quickly as possible.  The surety Bid bonds are submitted by the contractor along with their bid for a specific project. They are normally 5% to 20% of the total bid (10% is the most common). A Bid Bond provides the owner of the project with some financial assurance that should this contractor be awarded the construction project he/she will enter into the contract with the owner and also post the required Performance & Payment bonds.

The Performance Bond is submitted by the contractor to the owner of the project (Obligee), once he has been awarded the job. Performance Bonds guarantee satisfactory completion of a project. The surety company backs this guarantee up to the bond amount (which is usually 100% of the contract price but can be 50% sometimes).  Premiums for the Performance Bond are based on the Contractors (Principal) credit and financial history.

A Payment Bond is also submitted by the contractor to the owner of the project once he has been awarded the job. Payment Bonds guarantee that this contractor will pay certain bills for labor and materials (including those from subcontractors and suppliers) which are associated with this contract. The surety backs this guarantee up to the of the bond (which is often at 50% or 100% of the contract amount).  The premium for the Payment Bond is usually included in the premium billed for the Performance Bond.


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