Maryland Performance Bond
Description
How to fill out Performance Bond?
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FAQ
Typically, to get premium for a performance bond refunded, you need to return the original bond to the surety bond company. Performance bond premium cannot be refunded with copies of the bond because they are non-cancellable. Also, the performance bonds must be returned before the project starts.
Performance bonds are a subset of contract bonds and guarantee that a contractor will fulfill the terms of the contract. If they fail to do so, the Surety company is responsible for completing the contract obligations, either by securing a new contractor to complete the job or by financial compensation.
One key difference between performance bonds and surety bonds is the scope of their coverage. Performance bonds only cover a specific project, while surety bonds can cover multiple projects or ongoing business activities. Another difference is the party responsible for paying the bond premium.
Disadvantages of Performance Bonds A surety may accuse an owner of not complying with a bond agreement to avoid paying the owner. Another disadvantage is underestimating losses which means getting less money from a surety to complete the project. A surety may also try to settle for the least expensive solution.
Under a typical performance bond, a surety has four options after the principal defaults: work with the principal to cure the default; complete the contract itself; procure a replacement contractor to complete the contract, or pay the costs to complete the contract (up to the bond limit).
When a performance bond is called and the claim has been deemed valid, a surety company will sometimes find a new contractor to complete the project. When this happens, a new contract is drafted with different terms and prices.
Maryland requires a surety bond amount between $5,000 and $25,000, which can be obtained for a premium as low as $100 annually (based on a $5,000 liability).
A performance bond issued by a financial institution guarantees the fulfillment of a contract. If the U.S. exporter fails to "perform" as agreed, the buyer is compensated. A bid bond - often required in a bid selection process - guarantees the foreign buyer that the U.S. exporter will execute the contract if selected.