Construction Bonds

Contract Services offered by CBI

*Bid, performance & payment bonds* specialized for contractors *Subdivision & residential bonds * take advantage of CBI innovative solutions to reduce cost *international guarantee's* international contract guaranteee *Disadvantaged Business assistance* Surety solutions for MBE,WBE,SDV, or SBE companies

Surety defences to bid bond claims

1. *Tender Document mistakes*: 2.Bid Mistakes 3. non complaint bid

CBI has backed over x$ in condiminium backed projects

3 billion

triggering the bond

: *A construction bond is triggered when the principal defaults on the obligation guaranteed by the bond and the obligee follows the proper claim procedure*. the obligee cannot merely suspect a principal is in default of its obligations and leave it to the surety to make a determination. The *obligee must make the determination and a declaration (i.e. provide notice) of default to the surety. The surety's obligations do not arise until then .* * The obligee is not required to first exhaust other options such as suing the principal* -The law requires that the notice given the surety must be clear4 . Beyond that, the bond usually *sets out additional notice requirements*. Generally, there is a requirement that the notice be in writing and delivered within a specified time following the default. How strictly those requirements are enforced depends upon whether the surety has provided the bond in exchange for premium, or whether the principal fits within the relief provisions of the Insurance Act. 5

Surety

: A surety is the party who issues the bond that guarantees the obligations of the principal.

Construction bond

A construction bond is a written agreement in which one party (the surety) guarantees that a second party (the principal) will fulfil its obligations to a third party (the obligee).

• Court bonds:

A court bond is a general term used to describe many types of bonds that may be required in court proceedings. Examples include probate bonds, executor bonds, estate bonds, and more. These help protect participants in legal matters against fraudulent activities or uses of finances.

• Maintenance Bonds:

A maintenance bond is a type of surety bond purchased by a contractor that *protects the owner of a specified time period against defects and faults in materials, workmanship, and design that could arise later if the project was done incorrectly.*e

Public official bonds

A public official bond is a type of surety bond that allows a number of public officials to show that they can be trusted for their services. It is often the law thatpublic official's bonds are required because many people will need to work with money or other sensitive information

Tax bonds

A special tax bond is a type of municipal bond that is repaid with revenues derived from taxation of a particular activity or asset. These bonds are repaid with either excise taxes or special assessment taxes, but not by ad valorem taxes.

Subdivision and residential bonds

A subdivision bond is a bond that guarantees the completion of improvements made to subdivision property such as gutters, sidewalks, curbs, sewers, utility lines and others, in accordance with regulations.

• Supply Bonds

A supply bond is one of many contract bonds that ensures a supplier will produce the supplies or materials specified in the contract.

Self Insured Workers Compensation Bonds:

A type of surety bond that provides a promise to pay self-insured losses in case the promisor (self-insurer) is unable to meet its obligations. ... The state then recognizes that the self-insurer will have adequate resources to pay workers compensation claims.

Warehouse bonds

A warehouse bond is financial protection for individuals or business keeping goods in a storage facility.

Paid Loss Retro Bonds

An insurance cash flow plan that allows the insured to hold loss reserves until they are paid out in claims.

Suing on the bond:

An obligee who intends to sue to enforce a bond payment must do so before the time limit specified in the bond, usually one to two years from the date payment was refused. Relief from forfeiture is not available for missing the time limit to sue.

- Most tender documents require bidding contractors to submit:

Bid bonds The purpose of these bonds are to *ensure that the winning bid will be honoured either by the successful bidder or the surety*. This has the beneficial effect of encouraging contractors to only submit bids they can and intend to comply with.

Financial Planning

Free initial review strategic planning implementation monitoring and reset

Bid Mistakes ( surety defences to bid bond claims)

One of the most troublesome questions in bidding and tendering law - and by extension the law concerning bid bonds - *is whether an owner can accept a mistaken bid.* However, if the mistake is not apparent and can only be revealed by additional information, *the bidder may not withdraw and the bidder's failure to enter into the tendered contract will trigger the bid bond*.12 There can be numerous complications in applying these deceptively simple rules to real situations. Problems include: *1. distinguishing between patent (obvious) and latent (hidden) mistakes* (2)* distinguishing between mistakes that are fundamental and not fundamental to the tendered contract*; and (3) *determining any owner culpability for the mistake and whether it is enough to allow the bidder to withdraw.*

Consulting

Preference programs scheduling & procurement strategic partnerships staffing

Risk Managment:

Sub/GC qualification financing verification Sub bond review sub default programs

Making a bid bond claim

Tendering documents sometimes require that the owner prepare a formal contract in accordance with the precise terms of the tendering documents and present it to the contractor for acceptance. If so, this must be done before the owner can claim under the bid bond. If the tendering documents do not have this requirement, the owner need not present a formal contract before it can claim under the bid bond.

Litigation Bonds

The law seeks to balance the equities by requiring a bond to offset any damages that may be suffered should the court's action ultimately prove unjustified. This has given rise to bond requirements when seeking stays of execution of a judgment pending appeal, writs, or injunctions.

Material Change to Contract

The surety bonds a specific contract and takes the risk that the contractor will not perform its obligations under that contract. The owner cannot increase the risk without the surety's consent and, for that reason, a change to the contract without the consent will release the surety unless the change is unsubstantial or benefits the surety. -What constitutes a "material change" depends on the interpretation of the construction contract. Most construction contracts assume that there will be changes to the scope of work, and would include a "Changes in the Work" clause in the contract.

Calculating the bid bond payment

Unless stated otherwise in the bid bond, the surety's liability is limited to the lesser of: (a) *the penalty stated on the face of the bid bond; * *(b) the difference between the dishonoured winning bid and the next lowest bid*; or (c)* if there are no other bids available for acceptance, the cost of re-tendering the project, plus any difference in price between the dishonoured bid and the new winning bid, plus any cost arising from the consequent delay in completing the project*

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professional networking

accounting banking legal insurance

Bond Execution

bid, performance and payment bonds lisence, permit and court

Judicial bonds:

bond required by the courts in order to secure a party's costs of appeal, attachment, and injunction. In other words, it is a bond filed with the court as a guarantee. For example, a party to a court action can post a judicial bond to guarantee payment of a verdict while an appeal is considered.

long-range strategies

buy-sell/ continuity key man life indemnity control geographic expansion

• Warranty Guarantees:

written guarantee promising to repair or replace an article if necessary within a specified period." ... A warranty is a type of guarantee; in the case of a productguarantee/product warranty, *it's basically the same thing - the company undertakes to repair or replace your goods if they go wrong.*

Primary Commerical services offered by CBI

*International guarantee's * - international contract bonds *Commerical Contract* -manufacturing, janitorial & waste hauling Commerical Surety, liscense & Permit* -bonding contractors & mortgage bankers, *Court* - judiciary and Fiduciary/ probate bonds

Performance Bonds:

*guarantee that the contractor* that has entered into a construction contract will *perform all of its obligations under the contract.* evidence that the principal will be unable to meet future obligations. Typical examples include: - *failure to meet financial obligations such as paying subcontractors and suppliers* -*insolvency* -*refusal to remedy construction deficiencies*;16 and -*failure to meet the project schedule.*

The principal

*is the party who requests the surety to issue the bond and whose obligations are guaranteed*. For example, if a general contractor asks a surety to issue a bond to a project owner, the general contractor is the principal on the bond. Similarly, if a subcontractor asks a surety to issue a bond to the general contractor, the subcontractor is the principal on that bond

Oblige

*is the party who requires the principal to obtain the bond and who receives the benefit of the guarantee*. If the bond is obtained by a general contractor for an owner, the owner is the obligee. Likewise, if the bond is obtained by a subcontractor for a general contractor, the general contractor is the obligee.

bid bonds primary purpose:

*to ensure the winning bidder will enter into the tendered contract*, the bond may also *guarantee the winning contractor will provide other security specified in the tender documents, such as performance bonds and labour & material bonds * - *If the contractor fails to meet any of the obligations under the bid bond, the contractor is in default and the owner can call upon the surety to compensate for any loss. * It is *generally a condition of the bid bond that the tender must be accepted within some specified period (generally 30 or 60 days)* from the closing date of the tender. If this is not done, the contractor, the owner and the surety must execute an agreement to any extension, or the bid bond will simply expire and become unenforceable

material change to contract

-The surety bonds a specific contract and takes the risk that the contractor will not perform its obligations under that contract. The owner cannot increase the risk without the surety's consent and, for that reason, a change to the contract without the consent will release the surety unless the change is unsubstantial or benefits the surety.21 -What constitutes a "material change" depends on the interpretation of the construction contract. Most construction contracts assume that there will be changes to the scope of work, and would include a "Changes in the Work" clause in the contract.

making a bond effective execution & delivery

-To be effective and enforceable, a bond must be signed ("executed") by all the parties, including the surety, and then delivered to the obligee. If the obligee does not receive the signed bond for any reason, the obligee has no right to claim on the bond

Surety bond

1. A surety bond is guarantee of something. 2. There are 3 parties involved: principal oblige & surety 3. Surety bonds are not insurance but a form of credit 4. Surety bonds are the best choice

• Tender Bonds:

: A Tender Bond is required by a Contractor during the submission of tenders for contract jobs to the Principal. -* The main purpose of the Tender Bond is to guarantee that the contractor who is awarded the contract will undertake the contract under the terms at which the contractor has submitted and is capable of providing a Performance Bond thereafter* .

Contractor license bonds:

: A contractor license bond is a very important type of surety bond that actually serves a purpose with three different parties involved in a contractor project. This contractor's license bond not only helps you as the contractor, but helps others who could be involved and affected by unethical or costly business decisions. Contractor's license bonds legally protect the following three parties: you, the contractor, the company who has hired you, and the state bond issuing agency. By getting the contractor license bond, you are ensuring that you will always provide ethical and professional services. Contractor bonding also protects the public in that you and the company that hired you are indicating that you will provide professional services that will do no harm to them. Should someone be negatively affected by an unethical decision made, then they can file against the bond for financial recompense

Fiduciary bonds

: is a legal instrument that essentially serves as insurance to protect beneficiaries, heirs and creditors when a fiduciary fails to perform honestly or competently. A court may require a fiduciary bond for any person or party that hasfiduciary duty or responsibility to another.

• Payment Bonds:

A payment bond is a surety bond posted by *a contractor to guarantee that its subcontractors and material suppliers on the project will be paid*. They are required in contracts over* $35,000* with the *Federal Governmen*t and must be *100% of the contract value.* *They are often required in conjunction with performance bonds.*

Construction liens bond

guarantee (normally to a Court) that payment will be made to the lien claimants for whom the bond is posted if they prove their builders lien claims subject to the provisions of the Builders Lien Act1 . Owners post lien bonds so that construction liens can be removed from project lands without waiting for resolution of the lien claims.

Bid Bonds

guarantee that, if a bidding *contractor *is awarded a contract in response to a tender and then *refuses to enter* into the contract in accordance with the terms of the tender, the* surety will pay the owner the price difference between the dishonoured bid and the next lowest bid up to the penalty limit of the bond.*

• Advance Payment Bonds:

if the client* agrees to make an advance payment* (sometimes referred to as a *downpayment*) to *a supplier*, a bond may be required to secure the payment against default by the contractor. This is referred to as an advance payment bond (APB),advance payment *guarantee* or advance stage payment

Jan 28

just recognized as one of Merchants Bonding Company's Surety Elite Agencies! Elite partnerships with Merchants and being placed on their Leaderboard is a huge compliment.

Labour & material payment bond

provide for payment of the bonded principal's subcontractors and material suppliers should the principal not make payments as required

The federal miller act 1999

requires contractors to furnish payment and performance bonds before they can be awarded contracts that exceed $100,000. These bonds are also required for any publicly funded project that includes the alteration or repair of a building that costs $100,000 or more.