We usually make promises a lot. Some of these promises are to yourself, like promising yourself to diet and join the gym soon. The other type of promises is those made to other people, such as promising your partner never again to cheat on them, or promising your child that you’ll buy them a new iPad if they perform well at school. Promising is one thing, and honouring the promises made is another. Good people should always fulfil their promises; a promise is like a debt. Because promises can be defaulted, some serious promises for example contracts or agreements require assurance or a guarantee. 

When it comes to big projects, the person or party chosen to undertake the project needs to promise the project owner that they will deliver exactly what is required of them, among other things. But what if they default or fail to honour their promise? The project owner will obviously be left counting losses. To avoid this, a surety is required—a surety protects the project owner from any losses resulting from the failure of the contactor to observe their part of the agreement. On the same note, a surety bond involves three parties: the principal (the one acquiring the bond), the oblige (the one requiring the bond), the surety (the one backing the bond). A surety bond works by the surety providing a financial guarantee to the oblige that the principal will honour the agreement made or the provisions of the bond. 

A construction bond, also known as a construction surety bond, is a category of a surety bond that construction investors use. The construction bond ensures that the construction project owner is financially protected from the construction contractor’s incompetence’s, such as failing to complete the construction or violating the terms of the contract. For a construction bond or construction surety bond, the owner of the construction project or investor is the oblige, the contractor is the principal, and the company backing the construction bond is the surety. 

There are many different types of a construction bond. The most common ones are: 

Bid bond: A type of construction bond that covers the investor if the winning bidder opts out or fails to submit a performance bond. 

Performance bond: This construction bond financially covers the project owner in the case of poor quality work. 

Payment bond: This construction bond guarantees that the contractor is capable of meeting all the labour and material financial obligations. 

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