Bid bond is issued on behalf of contractors in connection with the submission of tenders for contracts. This bond is also called tender bond.
When a Contractor desires to submit his tender for a particular contract either with the government authorities or private owner the principal/ employer usually deposit earnest money. By submission of insurance guarantee in lieu of earnest money the contractor is released from requirement of depositing the cash money. Hence the bid tender bond is considered to be a guarantee against the submission of tender.
When the owner/employer is pre-financing a contractor by an advance payment on contract, Mobilization Advance Bond is issued on behalf of a contractor and to secure the project owner. Thus, this bond secures the Principal against the amount advanced by him to the contractor for the mobilization of contract work.
MAB/APB insurance witnesses that the contractor shall use the advance for a specific purpose and if they fail or commit default in fulfillment of any of their obligation for which advance payment is made the insurer will pay to the employer the amount in respect of which they have so failed but not exceeding the aforementioned sum.
As and when the said advance payment is adjusted against payment(s) from the running bills of the Contractor then this guarantee shall automatically stand reduced to the extent of such adjustment(s).
This bond is issued on behalf of a contractor and in favor of the project owner to guarantee the contractor’s default in compliance with his obligations, liabilities and faithful performance in accordance with the contact.
In accordance with the law of guarantee the insurer shall indemnified by paying amount (s) to the owner/employer of the project in the manner specified in the performance bond after proven default i.e. the failure of performance by the contractor. Such default of the contractor or his performance shall be judged and determined by the independent professionals.