What Is a Contract Bond?
Bonds Quote Forms
Types of Contract Bonds
Contractors often need different types of bonds to meet project requirements and industry regulations. The most common are bid, performance, and payment bonds, but some projects may also require supply, maintenance, subdivision, or site improvement bonds.
Contractor License Bond (CLB)
Before obtaining a contractor’s license, individuals must secure this bond to ensure compliance with industry regulations.
Bid Bond
Bid bonds protect project owners by ensuring contractors are qualified to take on a job. If a contractor backs out after winning a bid, the project owner can recover the difference between the original bid and the next highest offer.
Payment Bond
Payment bonds guarantee that subcontractors, suppliers, and laborers receive payment—even if the lead contractor defaults or files for bankruptcy.
Performance Bond
Performance bonds ensure that contractors complete projects according to contract terms, providing financial protection against incomplete or substandard work.
Maintenance Bond
Maintenance bonds safeguard against defects in materials or workmanship after project completion, covering necessary repairs if issues arise.
Supply Bond
Supply bonds guarantee that suppliers deliver materials, equipment, and other necessary items as outlined in purchase agreements.
Encroachment Bond
Encroachment bonds ensure contractors follow all regulations when working on public property and cover any damages caused during construction.
Development Bonds
Site Improvement Bond
This bond guarantees the completion of upgrades or renovations to existing properties, infrastructure, or structures.
Subdivision Bond
Subdivision bonds ensure contractors construct or improve public infrastructure within subdivisions according to local requirements.