Bid bonds, performance bonds, and payment bonds are used primarily in the construction industry for project-based work.
Bid Bonds are designed to protect the property/business owner from financial loss if the contractor does not follow through on the bid.
Performance Bonds are designed to protect the property/business owner from financial loss if the contractor does not fulfil the terms of the contract.
Payment Bonds are often referred to as labor/materials bonds. They are used as a guarantee that those supplying labor or materials to a construction project will be paid.
