Construction Contracts

Bid Bond

A bid bond is issued as part of a supply bidding process by the contractor to the project owner, to in hopes guarantee that the winning bidder will undertake the contract under the terms at which they bid.[1] The cash deposit is subject to full or partial forfeiture if the winning contractor fails to either execute the contract or provide the required performance and/or payment bonds. The bid bond assures and guarantees that should the bidder be successful, the bidder will execute the contract and provide the required surety bonds. A Bid Bond of amount not above 10% of the contract order total amount is deposited when a contractor, or the "supplier", is bidding on a tendered contract. The Bid Bond prequalifies the principal and provides the necessary security to the owner or general contractor, or "obligee", guaranteeing that the principal will enter into the contract, if it is awarded. A Bid Bond guarantees that the "obligee" will be paid the difference between the principal's tender price and the next closest tender price. This action is only triggered should the principal be awarded the contract but fails to enter into the contract, as agreed, with the obligee. The bid bond penalty is generally ten percent of the bidder's tender price. Contractors prefer the use of Bid Bonds because they are a less expensive option and they do not tie up cash or bank credit lines during the bidding process. Owners and general contractors also use Bid Bonds because they establish and confirm that the bidding contractor or supplier is qualified to undertake the project.

Payment Bond

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.[1] They are required in contracts over $30,000 with the Federal Government and must be 100% of the contract value. [2] They are often required in conjunction with performance bonds.

Performance Bond

A performance bond, also known as a contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.[1] A job requiring a payment and performance bond will usually require a bid bond, to bid the job. When the job is awarded to the winning bid, a payment and performance bond will then be required as a security to the job completion. For example, a contractor may cause a performance bond to be issued in favor of a client for whom the contractor is constructing a building. If the contractor fails to construct the building according to the specifications laid out by the contract (most often due to the bankruptcy of the contractor), the client is guaranteed compensation for any monetary loss up to the amount of the performance bond.

Bid Forms

A standard for on which all the bidders enter the required information to ensure that all bids will be identical in format, making it easier to compare and evaluate them. Bid forms must be signed by someone legally empowered to bind the contractor to the owner in a contract

Maintenance Bond

A type of surety bond purchased by a contractor that protects the owner of a completed construction project for a specified time period against defects and faults in materials, workmanship and design that could arise later if the project was done incorrectly. A maintenance bond is not technically insurance, but basically functions as an insurance policy on a construction project to make sure a contractor will either correct any defects that arise or that the owner is compensated for those defects. Pricing a maintenance bond is very different from pricing regular coupon paying bonds.

Speculative Construction

Building on speculative involves purchasing one or more lots and constructing a home (or homes) without a buyer in advance of construction.

Design-Bid-Build

Documents prepared then advertised and awarded to lowest bidding contractor.

Addendum

In other documents, most importantly in legal contracts, an addendum is an additional document not included in the main part of the contract. It is an ad hoc item, usually compiled and executed after the main document, which contains additional terms, obligations or information. An Additional Agreement to a contract is often an addendum to a contract. It is to be distinguished from other appendices to a contract which may contain additional terms, specifications, provisions, standard forms or other information which have been separated out from the main body of the contract. These are called: an appendix (general term), an annex (which includes information, usually large texts or tables, which are independent stand-alone works which have been included in the contract, such as a tax table, or a large excerpt from a book), or an exhibit (often used in court cases), Similarly an attachment is used usually for e-mails, while an enclosure is used with a paper letter. Addenda are often used in standard form contracts to make changes or add specific detail

Negotiated Contract

Owner negotiates contract w/ Contractor-Usually Commercial construction.

Plan Holder List

The plan holders list on the lettings tab displays all contractors who have plans for at least one proposal in the selected letting. The plan holders list for a selected proposal shows which contractors have the plans for that proposal. This page also marks eligible bidders for agencies who use that information. You can add yourself to the plan holders list.

Warranty Bond

You found the right contractor to install the plumbing, electrical wiring or HVACs for your improvement project. Or maybe you're having your house remodeled. Creating a Warranty Bond protects your investment in your house, business or side project by guaranteeing the work the contractor performs. Use the Warranty Bond document if: You are a contractor and the project documents or owner requires that you provide a guarantee regarding the repair of any defects in your work. You are a project Owner who would like a guarantee in the event the Contractor fails to repair any defects in the project. Repairs and remodels can be stressful, so you'll want to know that they're done right. As an owner, a Warranty Bond helps you cut the risk of defective construction by insuring the work performed. You can also benefit from a Warranty Bond since your money will be reimbursed if your contractor goes out of business or can't repair the construction work. A Warranty Bond is a contract between an owner, a contractor, and a surety company. It guarantees that any work defects found in the original construction will be repaired during the warranty period. If the contractor can't fix the defects, the owner will be repaid. Your state or a surety company usually issues Warranty Bonds.