In a construction bond, you will typically find three types of parties: the party involved in the project's construction, the eventual owners, and the surety company that has backed the bond.
In terms of types, this type of bond has three; take a look at the list:
• THE BIDDING BONDS
In situations where the expected honor and respect for the bid by the principal, which in this case could be the contractor, is not met, this bid bond comes into play and protects the project owner. The owner is the obligee held under the existence of this bond in this case, and he has the absolute right to sue the surety and the principal in order to establish the bond's enforcement. If the principal refuses to extend any kind of honor to the concerned bid, he accepts responsibility for any additional costs that may arise.
• PERFORMANCE BANKS
This performance bond is used by the contractor or principal to provide assurance or guarantee. This guarantee refers to the contract being completed in full accordance with its terms. If the principal is seen to be in default under any circumstances, the owner has the right to call on the surety to ensure that the contract is completed. In that case, the surety will be forced to award the contract to a new designated contractor.
• THE BONDS OF PAYMENT
This is the type you go to when you need all of your payments to be guaranteed, including payments to subcontractors and others from the mentioned principal. Subcontractors and suppliers are the only ones who can benefit from the payment bond. This bond is extremely beneficial to the owner, in particular, because it serves as a substitute for mechanic's liens as a non-payment remedy."""
