Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceHard
A Florida-based general contractor is required by a new municipal ordinance to obtain a bond guaranteeing that they will complete all public works projects according to contract specifications and that all subcontractors and suppliers will be paid. If they fail to do so, the municipality can make a claim against the bond. Which type of bond is this?
- AFidelity Bond
- BLicense and Permit Bond
- CContract Bond
- DJudicial Bond
Show answer & explanationAnswer & explanation
Correct answer: C. Contract Bond
This scenario describes a Contract Bond, specifically a Performance Bond (guaranteeing completion of the contract) and a Payment Bond (guaranteeing payment to subcontractors and suppliers), which are sub-categories of Contract Bonds. Contract bonds are used to guarantee the performance of a contractual obligation.
Why the other options are wrong
- A. A Fidelity Bond guarantees against dishonest acts by employees, not contract performance by the principal.
- B. A License and Permit Bond guarantees that a licensee will comply with laws and regulations, not the performance of specific construction contracts.
- D. A Judicial Bond is required in court proceedings (e.g., appeal bonds, bail bonds), not for general contract performance.
Surety Bonds - Contract Bond
A Contract Bond guarantees the fulfillment of obligations under a contract, commonly used in construction to assure project completion and payment to subcontractors.
- Includes Performance Bonds (guarantee work completion).
- Includes Payment Bonds (guarantee payment to subs/suppliers).
- Required for many public works projects.
Memory trick: Surety bonds are 'C.J.F.L.' - 'Contract, Judicial, Fidelity, License'.