Discuss the difference between bidbonds and performance bond

Discuss the difference between bidbonds and performance bonds? and also discuss the purpose and echanica of liens of construction?

Solution

Bidbonds - The Bid Bond is intended to keep frivolous bidders out of the bidding process by assuring that the successful bidder will enter into the contract and provide the required performance and payment bonds. If the lowest bidder fails to honor these commitments, the owner is protected, up to the amount of the bid bond, usually for the difference between the low bid and the next higher responsive bid.

Performence bonds - The Performance Bond secures the contractor’s promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed.

A performance bond is different in that subcontractors and suppliers really don’t have any rights under it. Instead, the performance bond is issued to the benefit of the property owner, who can make a claim against the bond if the contractor fails to perform. This performance bond, in other words, guarantees that the contractor will perform in accordance with its contractual obligations.

Purpose of liens of construction - Liens of construction are designed to protect professionals from the risk of not being paid for services rendered.

Echanica of liens of construction are extremely powerful tools for protection against nonpayment in the construction industry. However, just like any powerful tool, mechanics liens can be abused.