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Questions and Answers
What is the purpose of providing bonds in construction projects?
What is the purpose of providing bonds in construction projects?
- To ensure the project is completed on time
- To protect the contractor from non-payment (correct)
- To guarantee the quality of the construction work
- To provide financial security for the owner
What is a surety bond in construction projects?
What is a surety bond in construction projects?
- A form of insurance for the contractor
- A guarantee that the project will be completed on time
- A type of payment made by the owner to the contractor
- A guarantee provided by a firm that the contractor will fulfill the terms of the contract (correct)
Why do general contractors require major subcontractors to provide a surety bond?
Why do general contractors require major subcontractors to provide a surety bond?
- To ensure the subcontractor is financially stable
- To guarantee the quality of the subcontractor's work
- To protect the owner from non-performance by the subcontractor (correct)
- To provide insurance for the subcontractor
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Study Notes
- Construction projects require contractors to provide bonds for protection.
- Bonds protect employers from non-payment, non-performance, contractor default, and warranty issues.
- Performance Security, Advance Payment Bond, and other bonds must be provided and maintained for payment.
- Construction projects entail a great deal of risk for the owner.
- Projects are often based on reliable estimates of construction costs.
- A surety bond minimizes the risk of contractor defaulting on the project.
- Surety bond is a guarantee provided by a firm that states that the contractor will fulfill the terms of the contract.
- If the contractor defaults, the surety will be obligated to satisfy the terms of the contract.
- General contractors may require major subcontractors to provide a surety bond.
- Surety arrangement is common in construction.
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