A bid bond is provided by a contractor in a competitive bidding situation as a means of...
bond
A bond is a three-party contract under which the insurer (the surety) guarantees another's conduct for the benefit of a third party. Bid bonds, payment bonds, and performance bonds are the most common type of surety bonds, and fidelity bonds are a common form of crime bond.
Additional Information
The principal (i.e., the party paying the bond premium) is also called the obligor (i.e., the party with the obligation to perform). If there is a default, the issuer (i.e., surety/insurer) pays the loss of the third party (the obligee). The obligor must then reimburse the surety for the amount of loss paid.
Related Terms
A payment bond guarantees that suppliers and subcontractors will be paid for materials and labor...
A performance bond guarantees that the contractor will perform the work in accordance with the...
