California Property & Casualty Broker-AgentMiscellaneousEasy
A contractor is required by a construction project owner to provide a guarantee that the work will be completed according to the contract terms and specifications, including any defects found within one year of completion. Which type of surety bond best fulfills this requirement?
- AFidelity Bond
- BBid Bond
- CPayment Bond
- DPerformance Bond
Show answer & explanationAnswer & explanation
Correct answer: D. Performance Bond
A Performance Bond guarantees that the contractor will complete the project according to the contract terms and specifications, including any warranty periods for defects, making it the appropriate choice for the scenario.
Why the other options are wrong
- A. A Fidelity Bond protects an employer from employee dishonesty, unrelated to contract performance.
- B. A Bid Bond guarantees that the bidder will enter into the contract if awarded, not project completion.
- C. A Payment Bond guarantees that subcontractors and suppliers will be paid, not project completion.
Performance Bond
A type of surety bond that guarantees a contractor will complete a project according to the contract's terms and specifications.
- Ensures satisfactory completion of the work.
- Protects the project owner from financial loss due to contractor default.
- Often includes a warranty period for defects.
Memory trick: Contractors Perform, Pay, and Bid; Employees need Fidelity.