A Performance Guarantee is issued by an insurance company or bank to a contractor to guarantee the full and due performance of the contract according to the plans and specifications. A project requiring a payment & performance bond will usually require a bid bond, in order to qualify to bid for the project. A payment and performance bond will then be required of the winning bidder as a security to guarantee job completion. Should the contractor fail to construct the building according to the specifications laid out by the contract.
BID BONDS OR LETTER OF INTENT
A Bid Bond is purchased when a contractor, or the ‘principle, is bidding on a tendered contract with public authorities and or private owners. The Bid Bond prequalifies the principal and provides the necessary security to the owner or general contractor, necessitating a guarantee that the principal will enter into the contract if it is awarded. In essence, it provides a guarantee that the Bidder (Constructor), if awarded the contract will enter into the said agreement and furnish the prescribed Performance Bond.
A Maintenance Bond is a guarantee against defective workmanship or materials after the completion of a project. Maintenance Bonds often incorporate an obligation guaranteeing ‘efficient or successful operation’ or other obligations of like intent and purpose. Maintenance guarantees are also admitted in place of the retainer of up to 10%.
RETENTION MONIES GUARANTEES
This is similar to the Maintenance Bond and covers the same parameters
SUPPLIER SURETY (CONSTRUCTION INDUSTRY ONLY)
There is an increasing demand for supplier guarantees within the construction industry for the provision of steel and other building material to contractors and industry players. Credit insurance policies are currently available to buyers only and not suppliers.
CUSTOMS & EXCISE (FREIGHT FORWARDING)
Temporary Importation Warehouse Bond Where goods are temporarily imported and then exported, firms need to be exempted from paying duties. The issuance of a Temporary Importation Bond is an undertaking by the Guarantor that if goods are not returned to the country of origin by a specified date, the relevant duties (limited to the value of the Guarantee) will be payable by the Guarantor. Warehouse Bonds SARS (Customs) require a bond on warehouses storing imported goods to ensure that the predetermined duty is paid once the goods have been cleared and removed.