A contract bond, also known as a contractor bond, is a type of surety bond which guarantees that a job will be completed in accordance with the conditions set forth in the contract for that job.
Contract bonds are usually obtained by construction contractors to guarantee that if a job is not completed or the contractor defaults, the owner of the project will be compensated. Because they are mostly used in the construction industry, these bonds could also be referred as construction bonds.
Such bonds are required on all federal projects above $100,000 and on many state projects. Some private projects also require contractors to obtain contract bonds.
Different bonds are required for the different stages that a construction project goes through. For example, bid bonds are needed at the initial stage when contractors participate in a bid. Bid bonds guarantee that contractors will commence work on the project if they are awarded a bid, and that they will enter at the bid amount. They usually also guarantee that the contractor will post a performance bond when they are awarded the contract.