Contract Bonds or "Contractor Bonds"

Contract bonds or "contractor bonds" are a type of surety bond used heavily in the construction industry. contract bonds or "contractor bonds" provide a guarantee that a Surety will insure against a loss if the construction company fails to meet the obligations of their contract. With contract bonds or "contractor bonds" the projects owner (Obligee) receives a guaranty from a Surety that a general contractor (Principal) will conform to the obligations of a contract. Contract bonds should not be confused with contractor's license bonds, which are sometimes needed as part of a license. Included in the contract bond or "contractor bond" category are

bid bonds (surety provide a guarantee that a contractor will enter into a contract if awarded the bid);
performance bonds (surety provide a guarantee that a contractor will do his work according the obligations set forth in the contract)
Payment Bond (surety provide a guarantee that suppliers and subcontractors are compensate for work performed according to the contract


License and Permit Bonds

License and Permit Bonds are often required as prerequisites to receiving a license or permit to engage in certain business activities from certain federal, state, or municipal governments. These types of bonds essentially function by providing a guarantee from a Surety to a government (Obligee) that a company (Principal) will be in compliance with certain underlying statutes, state laws, municipal ordinances, or regulations. License and Permit bonds can also be issued to provide indemnity guarantees to third parties who become injured or sustain other damages because of the obligee's business activities as it pertains to the license or permit when such a guarantee is required. An example of this could be a business that hangs its sign over a public space such as a sidewalk being required to provide indemnity guarantees for injuries to citizens.

Some examples of License and Permit Bonds include:

Contractor's license bonds, these bonds provide a guarantee that a contractor (eg plumber, HVAC, electrician, or general contractor) is in compliance with all laws relating to his specific field of work. In the US, the requirements for bonding may be at a federal, state, or local level.
Customs bonds, including importer entry bonds, provide a guarantee from a surety to an Obligee that the Principal is in compliance with all relevant laws, including payment of import duties and taxes.
Reclamation and environmental protection bonds
Brokers bonds, including Mortgage, Insurance, and Title Agency bonds
ERISA (Employee Retirement Income Security Act) Bonds
Motor Vehicle Dealer bonds
Money transmitter bonds
Health spa bonds, these provide a guarantee that a health spa will comply with all local laws related to their field and also this ensures that they will refund any prepaid payments they have received in the event the spa closes.


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This content originally taken from https://jamesburgersite.wordpress.com/2016/09/15/surety-bonds-contractor-bonds/