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California Contract Bonds

Contract bonds can be required when a contractor wants to complete a job paid with public funds. This is usually in the amount of $25,000 and over. There are Federal, State, and local contract bonds. There are sub-contractor bonds, subdivision bonds and a whole hoste of others. Below are some of the common bonds. If you have a specific issue please do not hesitate to contact us with any questions.

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  • Bid Bond

    A bid bond guarantees the owner that the principal will honor its bid and will sign all contract documents if awarded the contract. The owner is the obligee and may sue the principal and the surety to enforce the bond. If the principal refuses to honor its bid, the principal and surety are liable on the bond for any additional costs the owner incurs in reletting the contract. This usually is the difference in dollar amount between the low bid and the second low bid. The penal sum of a bid bond often is ten to twenty percent of the bid amount.

  • Labor & Materials

    Guaranty or security provided by a bonding or surety company to the owner (principal) of a construction project on behalf of a contractor. These bonds are issued usually with (and for the same amount as) performance bonds, and cover payment for all equipment, labor, materials, and services in the event the contractor fails to pay for them under to the terms of the contract. A Maintenance Bond is a bond that guarantees against defects for a specified period of time after the completion of a contract.

  • Performace Bond

    A performance bond guarantees the owner that the principal will complete the contract according to its terms including price and time. The owner is the obligee of a performance bond, and may sue the principal and the surety on the bond. If the principal defaults, or is terminated for default by the owner, the owner may call upon the surety to complete the contract. Many performance bonds give the surety three choices: completing the contract itself through a completion contractor (taking up the contract); selecting a new contractor to contract directly with the owner; or allowing the owner to complete the work with the surety paying the costs. The penal sum of the performance bond usually is the amount of the prime construction contract, and often is increased when change orders are issued. The penal sum in the bond usually is the upward limit of liability on a performance bond. However, if the surety chooses to complete the work itself through a completing contractor to take up the contract then the penal sum in the bond may not be the limit of its liability. The surety may take the same risk as a contractor in performing the contract.

  • Payment Bond

    A payment bond guarantees the owner that subcontractors and suppliers will be paid the monies that they are due from the principal. The owner is the obligee; the “beneficiaries” of the bond are the subcontractors and suppliers. Both the obligee and the beneficiaries may sue on the bond. An owner benefits indirectly from a payment bond in that the subcontractors and suppliers are assured of payment and will continue performance. On a private project, the owner may also benefit by providing subcontractors and suppliers a substitute to mechanics’ liens. If the principal fails to pay the subcontractors or suppliers, they may collect from the principal or surety under the payment bond, up to the penal sum of the bond. Payments under the bond will deplete the penal sum. The penal sum in a payment bond is often less than the total amount of the prime contract, and is intended to cover anticipated subcontractor and supplier costs.

  • Maintenance Bond

    These bonds are for the maintenance period of a job that has been completed.

  • Supply bond

    These bonds are to guarantee that the contractor will supply the required products for the job.

Fast process

The process is really quite simple.

Use the contract quote button at the top of the page. We will then provide you a general quote. We will need the bond forms and possibly additional documents depending upon the contractual amount required.

General idea of the ratinging are below.

Bid bonds are a flat fee of $150. Contract bonds generally range from .05% - 5%.of the penal sum. There may be other requirements depending upon credit, type of job, experience, and a variety of other items.