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21 Cards in this Set
- Front
- Back
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Bond
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What is a bond? |
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It must be in writing, it is common for it to be a deed
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Who normally provides a bond? |
A financial institution e.g. a bank for a premium |
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What is a parent company guarantee? |
An arrangement where the contractual performance of one company in a corporate group is underwritten by the other members of that corporate group |
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What is an on demand bond? |
Where the beneficiary can call upon the surety for payment whether or not there has been a default under the main contract, as long as the call is not fraudulent |
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Where the surety will only pay out if certain specified conditions have been met e.g. a default under the main contract |
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What are the disadvantages of on demand bonds? |
1) Negatively affects the contractor’s cashflow |
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What are the different types of bond that may be provided? |
1) Performance bond |
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Which is the most common type in the construction industry? What does this do? |
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10% of the contract value, the premium for taking out the bond is added to the contract sum |
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How can the employer call for payment? |
They have to prove that the contractor has defaulted in their obligations under the main contract and that loss has been suffered |
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What is the purpose of a tender bond? |
1) Covers the party inviting the tender if the lowest tenderer refuses to enter into a contract |
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What is the standard value? |
1-5% of the tender sum |
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What is the purpose of a retention bond? |
Instead of deducting retention from each interim payment |
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What is the value of a retention bond? |
Should be the same as if retention were deducted e.g. 3% of the contract sum |
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What is the purpose of a payment bond? |
Where the contractor has significant early costs e.g. purchasing high-value plant, equipment or materials specifically for the project. The bond may be required to secure the payment against default by the contractor. |
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What is the purpose of a materials off site bond? |
Covers the employer against loss or damage to materials already paid for (through interim valuations) before the materials are delivered to site |
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What standard forms of bond does the JCT standard form provide? Where? |
Retention bond
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What are the arguments against requesting bonds? |
1) Shouldn’t really be needed – tenderer selection process should ensure only reliable and capable contractors are selected |
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Where might bonds be appropriate? |
1) If the contractor is new or unapproved |