Senin, 17 Agustus 2009

Understanding Bid Bond

Bid bond is guaranty from a 3rd party guarantor (commonly the finance company or the insurance firm) passed on to the principal (customer or client) by the bidder (contractor) with a bid. A bid bond ascertains that on approval of a bid by a customer, the bidder will go forward with a contract and will supplant the bid bond with the performance-bond. If not, the guarantor should pay the client the cash difference betwixt the bidder's bid and the next largest bidder. The difference is known as liquidated damages that may not go past the bid bond amount. Contrary to the fidelity bond, the bid bond isn't an insurance policy, and (when cashed in by a client) the amount of payment is reclaimed by the bank from the bidder. Also known as bid surety or bid guaranty.

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