Bond

Contract Guarantees/Bonds
Bond is an instrument to guarantee the performance of the Contractor in fulfilling the contractual obligations/responsibilities as required by the Principal (in a construction or construction-related contract).
In the event of default by the Contractor, the Principal shall be paid by the Insurer the amount guaranteed. The Insurer, in turn, shall recover the losses from the Contractor and the guarantors.
Bond can be issued in the form of either a Bank Guarantee or an Insurance Guarantee.
TYPES OF BOND
TENDER BONDThis is required by a Contractor in connection with the submission of tender for a contract job to the Principal.The purpose of the Bond is to guarantee the Contractor submits a bona-fide tender, stands by it, and is capable of providing a Performance Bond in the event the said Contractor’s tender is accepted by the Principal.
PERFORMANCE BONDThis is required in the event a Contractor’s tender is accepted by the Principal and a Letter of Award is issued.The purpose of the Bond is to guarantee the Contractor is able to fulfill the contractual obligations towards completion of the contract.
ADVANCE PAYMENT BONDThis is required in the event a Contractor is applying for an advance payment from the Principal to help funding the preliminary costs and mobilisation works of the contract.The purpose of the Bond is to guarantee the Contractor is able to make repayments for the advanced money. The mode of repayment is through deduction/recoupment from subsequent progress payments, the quantum of which is determined by the Principal.This type of Bond is only applicable for Government contracts only.