To understand the need of a construction bond you will have to understand the basic with an example. Consider a person “X” is a commercial builder and he submitted a construction plan to a township. He was told that the construction plan he submitted was approved along with a little changes from the township. “X” agrees the terms of the township and is willing to work on the project. But, the township wants a guarantee from the commercial builder “X” that he will complete the project on time and with the exact requirements as mentioned.
Here a construction bond is a perfect tool to ensure guarantee to the township. The construction bond is obtained from a surety company. The construction bond can include 5 types of bond to cover the project. These bonds can be Construction performance bond, maintenance bond, stage payment bond, payment bond and tender or bid bonds. For more information about the construction performance bond you can refer the infographic below. You will certainly get to know some unknown facts about the construction bonds in the infographic and will understand the basics of the construction bond well.