Used in conjunction with construction bidding processes. The bond acts as
a guarantee that, if awarded the contract based on the bid submitted, the contractor
will enter into a contract to perform the work at the price quoted. If the contractor
declines to enter into a contract to perform the work at the agreed-upon price,
the bid bond will reimburse the obligee (owner or upper-tier contractor) the
difference between the defaulting contractor's bid and the next lowest bid,
up to the penal sum of the bond.
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