Advance Payment Bonds
These types of Bonds are normally associated with contracts for construction of property or erection of plant and machinery.
Normally, payments are made by the principal to the contractor on either total completion of a project or on completion of each phase of the project. These payments are normally made after approval of the costs by the architects and quantity surveyors of the project.
In any case, the contractor must use some of his own finances to do the necessary work and then await payment.
Sometimes, the project may be so large that the funds required by the contractor even for one phase of the project may be beyond his financial resources, and in some cases, the principal may make and on account payment to the contractor, subject to the final costs being accessed, in which event, an Advance Payment bond will be called for.
A guarantee given to the customs and excise departments on behalf of the client
Covers the cost of tendering in case the tenderer does not take up the job after winning the tender
Covers the client in case of failure to perform the contract