Construction Bonds

What Are Construction Bonds?

Bonds pay for loss or damage caused to a third party as a result of a breach of contract. There is a variety of bonds available covering different risks.

Types of Bonds

Performance Bonds
  • Contractor and Sub-contractor Bonds
Road and Sewer Bonds
  • Contractor and Sub-contractor Bonds
  • Road Bonds including S38, S278
  • Utility Company Bonds (often referred to as Sewer Bonds) S104
Advance Payment Bonds
  • For Materials or Services

The bonds are either for the Local Authority or the Local Utility (WATER) Company. They are a form of security to provide those bodies with a sum of money should the Developer fail to install/complete the road or sewer to the necessary standard for it to be adopted by them. The bonds are referred to by the section of the Highways, Water and Planning Acts to which they pertain.

Section 278 – Changes to an Existing Road

Usually first requirement for Developer to create access onto site.

Section 104 – Water Utility Bond

Usually required early in Development plan.

Smallest of the usual Bonds

Section 38 – New Road

The main Bond requirement of this market sector

There are usually staged releases of the Bond as the road is built.

Section 290 – Private Roads

These roads will not be “adopted” and so often they can be dealt with by an alternative to a Bond.

Northern Ireland and Scotland have own Section numbering system

All Highways Authorities have their own slightly different wordings which need reviewing.

A bond to ensure the client performs as per the conditions of the contract. These are usually 10% of the contract sum but some employers require 15%.

A bond to cover any advance a client may receive from their employer. Usually the advance is used to buy materials to get prepared for a job. These bonds will be 100% of the advance payment made.

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