Which bonds are included in the category of contract bonds?

Bid bonds and performance bonds are included in the category of contract bonds because they are specifically designed to provide financial assurance in contractual agreements.

A bid bond guarantees that a contractor will enter into a contract at the submitted bid price if they are selected for the project. This protects the project owner from the risk of the contractor backing out after winning the bid.

Performance bonds, on the other hand, ensure that the contractor will fulfill their obligations as per the terms of the contract. If the contractor fails to complete the project or does not adhere to the agreed specifications, the performance bond provides compensation to the project owner for the financial loss incurred.

These types of bonds are essential in the construction and contracting industry, providing security to all parties involved in a contract. They help to establish trust between the project owner and the contractor, which is crucial for successful project execution.