30 Questions
Which document should be provided to the Surety as part of a demand under the Bid Bond?
The list of bid results
Which of the following is NOT a common problem to avoid in the bidding process?
Entering into a contract with another party
What is the purpose of the Performance Bond?
To guarantee that the Principal will perform the contract
When should a demand be made to the Surety under the Bid Bond?
Within seven months of the bid closing
What should be included in a demand made to the Surety under the Bid Bond?
Notice of the Principal's default on the obligation
Which of the following is the fundamental characteristic of a surety bond?
The Principal must be in default
What is the role of the Surety in the event of a defaulted contract?
Remedying the default and completing the contract
How does a Performance Bond protect the Obligee financially?
By financing the additional costs to complete a defaulted contract
What settlement option does the Surety have if the Principal defaults?
All of the above
What is the role of the Surety when completing the contract under a Performance Bond?
Making financial and payment commitments directly to the parties retained
According to the text, what should the Obligee do if a default occurs and they intend to look to the Surety?
Notify the Surety and provide them with a clear and unequivocal written demand under the bond
What action is the Surety likely to take when a default occurs?
Investigate the circumstances surrounding the default and the demand on the bond
What should the Obligee provide to assist the Surety in its investigation?
Copies of contract documents
What is the Surety's financial responsibility limited to?
The bond amount
What is typically part of the completion agreement between the Obligee and Surety?
The Obligee's commitment to pay the contract balance as defined in the bond
Which of the following is important to record in relation to the Principal's default or abandonment?
The date of work performed and any deficiencies observed
What should be done if completion of the contract or financial settlement with the Surety extends over a long period?
Take steps to preserve the right to recover under the bond
When must a suit against the Surety under the bond commence?
Within two years from the date of substantial performance of the contract
What is the recommended practice immediately after the Principal's default?
Evaluate the status of the work
What is the timeframe for commencing a suit against the Surety under the bond?
Two years
Which form of contract surety bond is designed to provide assurance that the contractor submitting the bid has been examined by the surety company and found qualified to perform the work?
CCDC 220, Bid Bond
What is the primary prequalification instrument issued by a surety company to ensure that construction purchasers receive a bid from a qualified contractor?
CCDC 220, Bid Bond
What is the condition of the form 220 Bid Bond?
The bond is null and void if the Principal satisfies the obligation to enter into a formal contract and provides the specified contract security.
What does a bid bond offer to the Obligee?
Financial protection if a successful bidder does not enter into a formal written contract or provide the specified security.
What is the maximum bond amount for a bid bond?
Usually 10% of the bid amount
According to the text, when the amount payable to the completion contractor exceeds the amount the Obligee would have otherwise been required to pay to the defaulted Principal had there been no default, what does the Surety do?
The Surety pays the additional amount to the Obligee under the bond as the work progresses.
According to the text, when the completion costs for which the Surety is liable are less than the bond amount, how does the Surety satisfy its obligation under the bond?
The Surety pays the lesser amount to the Obligee in full satisfaction of its obligation under the bond.
According to the text, what happens if there is a disputed default and a determination is ultimately made in favor of the Obligee?
The Surety is liable to the Obligee to the same extent as if the default had been clear at the outset.
According to the text, in a disputed default, what approach do the parties often agree to?
To focus on promptly completing the work and avoiding additional disputes about the costs of completion.
According to the text, what does the Obligee need to do to ensure the Performance Bond remains in effect in the event of material changes in the contract?
Notify the Surety of the material changes and obtain the Surety's consent.
Test your knowledge on surety bonds and their payment terms with this quiz. Learn about the obligations of the obligee, principal, and surety, and understand how the bond amount is determined and paid.
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