Texas General Lines — Property and CasualtySurety and BondsMedium
A developer, 'Urban Sprawl Inc.', is constructing a new housing subdivision. Local regulations require the developer to install sidewalks, streetlights, and drainage systems. To ensure these improvements are completed even if Urban Sprawl Inc. runs out of funds or abandons the project, the city requires a bond. Which specific type of contract bond is this?
- AMaintenance Bond
- BCompletion Bond
- CPayment Bond
- DBid Bond
Show answer & explanationAnswer & explanation
Correct answer: B. Completion Bond
A Completion Bond, or sometimes referred to as a Subdivision Bond or Site Improvement Bond, guarantees that a contractor or developer will complete the required improvements (like sidewalks, utilities) for a project or subdivision according to specifications.
Why the other options are wrong
- A. A Maintenance Bond guarantees the work will be free from defects for a period after completion.
- C. A Payment Bond guarantees subcontractors and suppliers will be paid, not project completion.
- D. A Bid Bond guarantees the bidder will enter into the contract if awarded, not project completion.
Completion Bond
A type of contract bond that guarantees a contractor or developer will complete a project or specific improvements as agreed.
- Often used in subdivision development for infrastructure.
- Ensures completion of required site improvements.
- Protects the obligee (e.g., municipality) from unfinished work.
Memory trick: Contract Bonds: Before, During, After, or All?