What is a contract bond and when is it required?
A contract bond, also known as a performance bond, is a type of insurance required in certain construction projects in the state of Florida. A contract bond is a guarantee that the contractor will complete the job as promised in the contract. In the event that the contractor fails to fulfill the contract, the bond provides financial compensation to the owner for any losses incurred. In the state of Florida, a contractor must generally obtain a contract bond when the total contract sum exceeds $35,000. The bond must be in the amount of at least 50% of the total contract amount, and must be issued by a surety authorized to do business in the state. The bond is usually written for a term of one year, but may be extended if necessary. It is important to note that a contract bond is different from a payment bond, which guarantees payment for materials and labor used on the project. A payment bond may be necessary in addition to a contract bond. In summary, a contract bond is a type of insurance required in certain construction projects in the state of Florida when the total contract sum exceeds $35,000. The bond provides financial compensation to the owner in the event that the contractor fails to fulfill the terms of the contract. A payment bond may also be required in addition to the contract bond.
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