By: Civilsure  01-10-2011
Keywords: Construction, Insurance, Insurance Brokers

Bid / Tender Bonds

When tenders are submitted, they are usually accompanied by Bid/Tender Bonds. The purpose of the Bond is to compensate the employer for costs incurred in the event that the company, which is successful in being awarded the tender, does not or cannot take up the contract.

Performance Bonds

This is probably the most common form of Guarantee, which protects the Employer/Principal against the risk of the contractor failing to comply with the conditions of the contract.

Traditionally, the guarantee amount is equal to 10% of the contract sum. However, recently the new format JBCC 'fixed' (7, 5%) guarantee or 'variable' (12, 5% reducing to 2%) guarantee was introduced, of which the latter version includes a Retention money element.

Advance Payment Guarantee / Bond 

Some contracts make provision for Employers / Principals to pre-finance a contractor by making payments before commencement of the contract. The Employer / Principal secure such a risk by acquiring an advance payment guarantee / bond in return. 

Usually, the guarantee amount will decrease in accordance with the percentage of the work certified. The guarantee / bond will be equal to the pre-financed amount - usually 30%.

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