Commercial Bonds
Bid Bonds guarantee the owner that the principal will honor its bid and will sign all contract documents if awarded the contract. The owner is the obligee and may sue the principal and the surety to enforce the bond. If the principal refuses to honor its bid, the principal and surety are liable on the bond for any additional costs the owner incurs in reletting the contract. This usually is the difference in dollar amount between the low bid and the second low bid. The penal sum of a bid bond often is ten to twenty percent of the bid amount.
Payment Bonds guarantee the owner that subcontractors and suppliers will be paid the monies that they are due from the principal. The owner is the obligee; the “beneficiaries” of the bond are the subcontractors and suppliers. Both the obligee and the beneficiaries may sue on the bond. An owner benefits indirectly from a payment bond in that the subcontractors and suppliers are assured of payment and will continue performance. On a private project, the owner may also benefit by providing subcontractors and suppliers a substitute to mechanics’ liens. If the principal fails to pay the subcontractors or suppliers, they may collect from the principal or surety under the payment bond, up to the penal sum of the bond. Payments under the bond will deplete the penal sum. The penal sum in a payment bond is often less than the total amount of the prime contract, and is intended to cover anticipated subcontractor and supplier costs
Subdivision/Site Improvement Bonds guarantee the completion of designated improvements as a precondition to granting a construction permit or to allow the recordation of a final parcel map. The guarantee posted by the owner/developer assures that they: 1) will have the financial resources to pay for all the improvements; 2) the improvements will be built as required within a specified period of time; and 3) they will maintain said improvements for a minimum of 1 year against defective workmanship and/or materials. Generally, jurisdictions have statutes that require an owner or developer of real property to post financial security to guarantee work.
A fidelity bond is not a surety bond, but a form of insurance. A fidelity policy insures against employee theft. Sometimes known as a "Dishonesty Bond," a Fidelity Bond covers employers from losses stemming from dishonest and/or negligent actions of their employees. Fidelity Bonds reimburse employers for losses, up to the amount of the bond, from employee fraud, theft, forgery, and embezzlement of the company's cash and other valuable assets. Some insurance companies offer Fidelity Insurance, which covers all employee dishonesty in general. Others offer Fidelity Bonds, which cover only specific employees (typically those entrusted with handling the organization's most important assets). Unlike Surety Bonds, Fidelity Bonds are purchased only for the employer's benefit, and only cover losses stemming from employee dishonesty and negligence.
Miscellaneous Bonds
There are thousands of other types of bonds that we have available that are too numerous to name. Here are a few of the more common types. Please feel free to ask about any others you do not see here.
ERISA Bonds, Notary Bonds, License Bonds, Judicial Bonds, Mortgage Broker Bonds, Court Bonds
