A surety bond is a legal, three-way contract where an investor (surety) agrees to pay an obligee a specified monetary amount in case the principal (obligor) fails to satisfy their contractual obligations. In today’s increasingly competitive market, construction bonds protect the interested parties from the various risks involved in daily business operations. There are a variety of bonds addressing specific business needs.
A bid bond is obtained by a business, organization or individual to demonstrate they are financially capable of entering into the contract if they win the bid. This bond is crucial for market success because it guarantees that fulfillment of the contract will not be impeded by insufficiency of funds, thereby increasing the chances of earning the contract. It therefore helps a business win a clients’ confidence in its ability to successfully execute the contract.
A performance bond is a legal, written guarantee by a third party. It acts as an assurance to the obligee that if the contract is not fulfilled it will be compensated with a pre-determined amount of money. This increases the obligee’s confidence, knowing that they will be protected in case of a failure to fulfill the contract. If the organization fails to fully execute the contract, the guarantor may recover the amount paid to the obligee from the contractor.
Payment and Supply Bonds
A payment bond is a guarantee the principal will pay all suppliers and subcontractors who contribute to the successful completion of the contract. This can increase the employees’ and suppliers’ efficiency, besides saving a business the cost of risks arising from lawsuits by disgruntled workers and/or suppliers. Supply bonds guarantee faithful fulfillment of the terms of the supply agreement.
License and Permit Bonds
License and Permit bonds are surety bonds required by local, state and federal authorities as a demonstration that a business is operating according to the stipulated rules and regulations. This type of bond is crucial for winning clients since it proves that the business is abiding by the governing rules. It also saves businesses costs that can occur, such as responses to lawsuits and legal sanctions arising from violations of the market laws.
This bond protects the obliges of a completed construction project. It guarantees that the business will perform maintenance functions and correct any faults in design and materials for a specified period of time. It can help a business win a clients’ loyalty and bolster the businesses' image.
A miscellaneous bond is a general surety bond that does not fall into any of the recognized categories, but ensures that the client can recover losses from a guarantor in case the business is unable to fulfill a contract as agreed.
Give us a call at 410-312-7800 for more information on choosing the most beneficial Maryland surety bonds for your business.