A bond usually refers to a performance bond: a guarantee given by a bank or insurance company (the surety) to the client that it will pay a sum of money if the contractor fails to perform its obligations under the contract. Other types of bond, such as a tender (bid) bond, an advance payment bond or an off site materials bond, are sometimes also required.
On UK projects a performance bond is commonly set at 10% of the contract sum and is usually required to be provided within a set period after the contract is entered into. The QS should check the form of bond carefully, because it determines how easily the client can call on it.
- On demand bonds can be called without proving a breach.
- Conditional (default) bonds require the client to prove breach and loss.
- The expiry date or event, and the cost of the bond, should be checked and allowed for.
Related terms: parent company guarantee, retention bond, surety, collateral warranty.
