Area of Law: Insurance Law
Answer # 2791
Contract Bonds / Performance BondsRegion: Ontario Answer # 2791
What is a Contract Bond / Performance Bond?
A Performance Bond, also known as a Contract Bond or Construction Bond, is a legal agreement issued by an insurance company. The bond protects construction project owners (obligees) from financial loss by guaranteeing that the contractor (principal) will complete the construction project in accordance with the terms of the contract. Should the contractor fail to perform their obligation under the contract, the surety will assume the responsibilities of the contract as per the terms of the contract and subject to the conditions on the bond.
When are Performance Bonds needed?
When a contractor is a successful bidder on a tender, a Performance Bond is often required to be submitted along with various documents before the work can begin.
Performance Bonds are most often requested on government projects (including municipal, provincial and federal), but can be requested by private owners as well. Performance Bonds are available for general contractors, sub-contractors along with many niche industries including suppliers, manufacturers and engineering companies.
More information on other types of Construction Bonds and other construction issues can be found in Construction Law.
For more information about Performance Bonds, or to purchase a bond, contact Ai Surety Bonding.
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