Construction Bond

Construction.

It's the hallmark of American Greatness. Tall buildings. Big bridges. And sports stadiums that would make the Greek Gods envious. All of those construction projects take money (and occasionally a large bribe to a foreman…but that's a different definition; See: Corruption).

If you know anything about how common it is for delays to plague that sector, you’d know it comes with a fair amount of financial risk. Which is why construction bonds exist.

Construction bonds are used to ensure that construction is completed, and are typically required by local governments for public bids. Certain bonds are required before any work can begin. A variety of bonds that are needed on public projects and by some private developers as well.

Should the contractor fail to complete the project according to the terms of the bond, a developer can claim the bonds and recoup any losses.

Example:

Bid bonds ensure that contractors bring developers a serious bid and have the necessary capital and credentials to complete the project. Should a developer select a job, but the contract declines the gig or retracts their bid, the developer can claim this bond and collect any difference between the withdrawn bid and the second highest project bid.