Bonds

Bid Bonds

 

A bid/Tender bond is normally required when bidding or tendering for goods or services and in the event that a winning bidder fails to honor the bid, the process has to be repeated and costs incurred are met by the Bid Bond.

Performance Bonds

 

Performance bonds are used to guarantee a contractor's performance for services or works as per contract in that failure to meet the terms, the principal may call for remedy as granted by the Bond.

Advance Payment Bonds

 

An advance payment, or simply an advance, is the part of a contractually due sum that is paid or received in advance for goods or services, while the balance included in the invoice will only follow the delivery. It is called a prepaid expense in accrual accounting for the entity issuing the advance.

 

If the client agrees to make an advance payment (sometimes referred to as a down payment) 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.

Retention Bonds

 

A Retention bond is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate that is retained by the client. The purpose of retention is to ensure the contractor properly completes the activities required of them under the contract.

 

It is a type of performance bond that protects the customer after a job or project is finished. It guarantees that the contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the contract, even if full payment has been made to the contractor.

Custom Bonds

 

Customs Bond ensures that taxable goods on which duty has not been paid yet do not enter the market. In the event that they do, the insurer will be called upon to pay the duty. Customs bonds are given for goods in transit through a country while Import Bonds are given to cover duty for goods imported into the country.