What does Bid Bond mean? Read on to discover the definition & meaning of the term Bid Bond - to help you better understand the language used in insurance policies.
Used in conjunction with construction bidding processes. The bond acts as a guarantee that, if awarded the contract based on the bid submitted, the contractor will enter into a contract to perform the work at the price quoted. If the contractor declines to enter into a contract to perform the work at the agreed-upon price, the bid bond will reimburse the obligee (owner or upper-tier contractor) the difference between the defaulting contractor's bid and the next lowest bid, up to the penal sum of the bond.
We hope the you have a better understanding of the meaning of Bid Bond.