Surety Bonds & Construction Guarantees Flashcards
7 cards from real CRIS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Surety Bonds & Construction Guarantees flashcards as text
What is the primary purpose of a bid bond in construction projects?
Answer: To guarantee the bidder will enter into a contract at the bid price if selected
A bid bond guarantees that if selected, the bidder will enter into the contract at the bid price and provide the required performance and payment bonds.
In a surety bond arrangement, who are the three parties involved?
Answer: Principal, obligee, and surety
A surety bond involves the principal (contractor who must perform), the obligee (owner who benefits), and the surety (bonding company that guarantees performance).
What does a performance bond guarantee in a construction project?
Answer: That the contractor will complete the project per contract terms
A performance bond guarantees that the contractor will complete the project according to the contract's terms, specifications, and schedule.
Which type of surety bond protects subcontractors and material suppliers from non-payment by the general contractor?
Answer: Payment bond
A payment bond guarantees that the contractor will pay subcontractors, laborers, and material suppliers, protecting them from non-payment.
Under the federal Miller Act, what bond amount is required for performance and payment bonds on covered federal construction contracts?
Answer: 100% of the contract amount
The Miller Act requires both performance and payment bonds equal to 100% of the contract price on federal construction contracts exceeding $150,000.
What is a maintenance bond (warranty bond) in construction surety?
Answer: A bond guaranteeing the contractor will correct defects during a specified post-completion warranty period
A maintenance bond guarantees that the contractor will correct any defects in workmanship or materials that appear within a defined period after project completion.
What is the 'penal sum' in the context of a surety bond?
Answer: The maximum dollar amount the surety is obligated to pay under the bond
The penal sum is the maximum amount the surety is financially obligated to pay under the bond in the event of a principal default.