FACC 220 Study Guide - Real Estate Broker, Polycarbonate, Smart People
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There are three types of bonds bid bonds, performance bonds and payment bonds.
Bid Bonds. Bonds guarantee that the contractor holding the bond will perform a
specified obligation or face financial penalties.
A bid bond guarantees the owner that the principal will honor its bid and will sign
all contract documents if awarded the contract. Therefore this will help John find a
contractor that meets his requirements with regards to both finance and time
The Second is Performance bonds, this guarantees John that the contractor will
complete the contract according to its terms including price and time.
The final is the Labor and Materials bonds which insure that the contractor will pay
subcontractors and suppliers all amounts due. If the contractor does not fulfill the
requirements set in any of the bonds then John will be guaranteed any monetary
loss up to the amount of the bond.
Bonding is the process of creating a surety bond so that owners have a guarantee for their projects.
Insurance, on the other hand, pertains to a number of different situations that may or may not occur.
When an owner begins an insurance policy, the owner contracts directly with the insurance company for
one of its packages. With a performance bond, there are three parties, the contractor, the owner and the
In insurance, if an insured event occurs and the insurance company agrees with the claim, the company
pays the owner directly and considers this payment a loss. In bonding, the surety agent does not need to
take a loss on payments against the bond. The surety agent pays the owner if a claim is approved, then
collects the payment from the contractor.
Since there has been No work done so far the engineer Is protected by CCQ
1458 as it states that Every person has a duty to honour his contractual
undertakings. Where he fails in this duty, he is liable for any bodily, moral or
material injury he causes to the other contracting party and is liable to
reparation for the injury. Furthermore CCQ 1590 explains that An obligation
confers on the creditor the right to demand that the obligation be performed in
full, properly and without delay.
Where the debtor fails to perform his obligation without justification on his
part and he is in default, the creditor may, without prejudice to his right to the
performance of the obligation in whole or in part by equivalence,
(1) force specific performance of the obligation;
(2) obtain, in the case of a contractual obligation, the resolution or resiliation
of the contract or the reduction of his own correlative obligation;
(3) take any other measure provided by law to enforce his right to the
performance of the obligation.