Which type of bond guarantees that the contractor will complete the project according to the contract terms?
Correct Answer
B) Performance bond
A performance bond guarantees that the contractor will complete the work according to the contract terms and specifications. Payment bonds guarantee payment to subcontractors and suppliers.
Why This Is the Correct Answer
A performance bond is specifically designed to guarantee that the contractor will complete the project according to the contract terms, specifications, and within the agreed timeframe. If the contractor fails to perform, the surety company will either complete the work or compensate the owner for the additional costs to complete the project. This bond protects the project owner from contractor default and ensures project completion. Performance bonds are the primary financial guarantee for contract fulfillment in construction projects.
Why the Other Options Are Wrong
Option A: Payment bond
Payment bonds guarantee that the contractor will pay subcontractors, suppliers, and laborers, not that the project will be completed according to contract terms.
Option C: Maintenance bond
Maintenance bonds (also called warranty bonds) guarantee that the contractor will remedy defects that appear during a specified warranty period after project completion, not the initial completion itself.
Option D: Bid bond
Bid bonds guarantee that if awarded the contract, the contractor will enter into the contract and provide required bonds, but do not guarantee project completion.
Memory Technique
Use the acronym 'PPM-B': Payment (pays subs/suppliers), Performance (project completion), Maintenance (warranty period), Bid (bid guarantee)
Reference Hint
Florida Building Code, Chapter 1, Section 105 - Permits and bonds, or construction law reference materials covering surety bonds
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