Construction DB | Construction Site Handbook | Bonds, Guarantees and Warantees

Construction Site Handbook

Share your expertise and experience with the Construction DB community. You are free to add or edit any of the articles in the Construction Knowledge Collaboration Project.

[English | 简体] Bonds, Guarantees and Warantees

Performance Bond / Bank Bond
It is often for a construction contract that the employer requires the contractor to provide some security to guarantee the fulfillment of the sublet contract and to protect the employer in respect of the additional costs caused by the contractor’s failure to perform . A bond is just a simple contract , separated from the construction contract , by which someone ( usually a bank or guarantor ) agrees to pay to the employer a certain sum of money if the defined terms of the bond are met . The contractor may have to deposit a certain amount of money into and secured by the bank , and / or to pay financial charges and interests to the bank for the issue of a bond .

Maintenance Bond
The concept of this bond is more or less the same as the performance bond by which provides the employer with security against any failure by the contractor to comply with its obligations to remedy and maintain the finished works after completion and before the defects liability period ( DLP ) expires .

Company Guarantee
Other than a bank bond is required from the main contractor to secure the fulfillment of a contract , a company guarantee is also needed . For large civil engineering projects , it is usual that a group of local and / or overseas construction companies to form a joint venture ( JV ) to tender the works owing to sharing of commercial risks , financial , technical and / or management supports .

For some commercial projects , sometimes the developer or the construction company may even make use of a new company to tender the work in order not to affect the routine business of the parent company in case there were troubles . Thus , in all these cases , a parent company guarantee will be required by the Client to secure the satisfactory completion of the project .

Product Warranty
For some specific material or end products , the Client might seek for a warranty from the main contractor but is usually provided by the nominated supplier to guarantee the quality and / or performance of the specified products for a certain period of life time , beyond the maintenance period but excluding the normal tear and wear of the material .

This may apply to , for instance , waterproofing for a structure , durability of a bridge bearing , performance of E & M equipments , protective coating of metal , or effectiveness of acoustic assemblies , etc .

Bonds, Guarantees and Warantees Sub-Pages