In a construction bond, there are often three different types of parties: the party responsible for the project's construction, the eventual owners, and the surety business that is backing the bond.
Three different types of bonds fall under this category; here is the list:
THE BIDDING BONDS
This bid bond comes into play and offers protection to the project owner in cases when the principle, in this example maybe the contractor, does not uphold the expectations of honor and respect for the bid. The owner is the obligee held responsible for the bond's performance in this instance, and he is fully entitled to sue the surety and the principal to establish the bond's enforcement. The principle assumes responsibility for being liable for any additional costs that may arise in the event that the principal declines to extend any type of honor to the relevant bid.
• THE RELIABILITY BONDS
The contractor or the principal uses this performance bond to offer some sort of assurance or guarantee. This guarantee refers to the contract's complete performance in line with its relevant provisions. The owner has the right to call on the surety to make sure that the contract is completed if the principal is considered to be in default under any circumstances. In that situation, the surety will be forced to assign a new designated contractor to the contract.
BONDS FOR PAYMENT
This is the kind you go to when you require all of your payments—those that have been past-due to subcontractors and others from the indicated principal—to be guaranteed. The only parties who are eligible to receive the payment bond as beneficiaries are the suppliers and subcontractors. The owner in particular benefits greatly from this bond because it serves as an alternative to mechanic's liens as a non-payment remedy."""