- Advance Payment Bond
- Counter Bid Bond
- Counter Indemnity Bond
- Custom Agent Bond
- Performance Bond
- Retention Bond
- Security Bond
- Tender / Bid Bond
This bond is usually effected by a contractor before any advance payment is made to him by the principal either as mobilization fee or advance payment of the contract value at various stages of the contract works. It guarantees that the amount advanced is utilized for its purpose or be refunded if not used. Amount recoverable is the difference between the amount advanced and the contract work already done plus value of materials already supplied.
A bid bond is issued by the surety (insurance companies, banks etc.) to the project owner or contractor; it is part of a bidding process that guarantees that the bidding winner will undertake the contract based on the terms of the bid.
The purpose of a bid bond is to minimize the risk of the project owner or contractor during bidding. It helps to stop bidders from submitting frivolous bids because they will be obligated to perform the job or at least pay the premium.
Usually 1% of the bond value is paid as premium.
A bidder has to submit the following documents to the surety; the certificate of incorporation of the contractor’s company, newspaper publication where the bid was advertised, passport photograph of the directors of the company, duly filled personal and corporate guarantees forms, duly filled bond proposal form and the surety makes inquiries to see the credibility of the contractor. When the contractor is found capable of carrying out the contract, then premium is paid and a bid bond is issued.
A Counter bid bond in essence is when a bid bond has already been issued and the surety goes out to get another surety to protect it.
A counter indemnity or guarantee is a guarantee issued by Insurance Company to a bank or to another insurance company. It indemnifies the bank /Insurance Company against failure of the client to perform. The bank/insurance company transfers the risk to an insurance company, which in turn bears the burden of compensating the bank/Insurance company in case of default.
It is usually taken by custom agents and it protects the government against risk of evasion by custom agents of custom duties and taxes
This policy binds the insurer as surety that the physical work as contained in the contract agreement is completed by the contractor according to specifications, and the time specified. If the contractor defaults, the surety pays damages for non-performance or for not completing the contract according to specifications.
This bond protects the principal against loss of such part of the contract money that should have been retained by him until the completion of the contract and/or the end of the defect liability (maintenance period) but which because of the guarantee given by the insurer (surety) that the contractor would fulfil all the terms of defect liability clause, was paid to the contractor.
A security bond is a written agreement wherein one party (the surety) obligates itself to a second party (principal) to answer for the default of a third party (contractor) in failing to perform specified acts within a stipulated time. This is usually required by the ministry of labour and productivity before it issues out licence to Employers of labour/recruiters.
This is required in connection with submission of tender for contract. The bond guarantees that if the contractor, having been awarded the contract, fails to take up the contract, the insurer (surety) pays for the difference between the contractor? bid and that of his nearest competitor who will take up the contract thereafter.