Types of Bonds
Despite the many titles given to bonds over the years and in different countries (e.g performance bonds, contract bonds, advance payment bonds, retention bonds, supply bonds, on demand bonds, bid bonds, development bonds etc .................) the underlying purpose is the same - they are designed to guarantee the performance of a contractual obligation or make good the loss suffered as a result of failure to do so.
The main types of bonds issued by Construction Guarantee are outlined below:
Contract Bonds are the most commonly issued type of bond and in the context of a building contract are designed to cover the additional cost incurred by the Employer in the event of default (breach) on the part of the Contractor. The most common reason for default is due to Contractor Insolvency. In response to the economic collapse the use of Contract Bonds has become more widespread in Ireland and they are now viewed as an ESSENTIAL requirement for managing risk on construction projects.
Advance Payment Bonds:
Advance Payment Bonds are designed to provide cover in situations where a deposit is paid by the Employer to the Contractor in advance of delivery of specific items or material to site and provide protection to the Employer in the event of non performance/delivery. Generally these bonds are required in instances where raw material needs to be ordered prior to fabrication (e.g. structural steel/glazing/cladding etc) and can assist activity along the supply chain.
Retention Bonds are issued following Substantial Completion and are used as a substitute for the retention fund. Rather than hold retention for the Defects Liability Period the funds are released to the Contractor.
In addition to the above Construction Guarantee will consider issuing any form of bond which may be requested in connection with a construction project.
For further information please contact us on 01 6687240 or firstname.lastname@example.org.
Alternatively, visit our Document Centre which includes sample bond wordings and explanatory notes.