Definition of Maintenance bond:
A surety bond is a three-way contract where a third party called the surety guarantees the contractual obligations of one party (the principal) to another party (the obligee) by agreeing to pay a sum to the obligee as compensation if the principal does not fulfill its obligations. The surety assures the obligee that the principal will perform the required tasks. A maintenance bond is a type of surety bond used by contractors.
A maintenance bond is a type of surety bond purchased by a contractor that protects the owner of a completed construction project for a specified time period against defects and faults in materials, workmanship, and design that could arise later if the project was done incorrectly. However, pricing a maintenance bond is very different from pricing regular coupon paying bonds.
Legally enforceable written agreement whereby a contractor or craftsman guarantees against defects in workmanship and/or materials for a certain period after completion of a contract or job.
How to use Maintenance bond in a sentence?
- Contractors purchase a maintenance bond, while the owner or client of the project is the protected party. .
- The type of surety bond that helps protect the owner of a construction project against defaults and faults is called a maintenance bond. .
- These types of bonds are required on most public and state construction projects. .
- Maintenance bonds are only active for a certain period and are not technically insurance. .
Meaning of Maintenance bond & Maintenance bond Definition