What is an Alabama Contract Bond?

Secure the completion of your dream project today through this bond!

Alabama Contract BondA Contract Bond is more than just a mandatory requirement. This type of bond will help you, the contractor, in many ways as well! Here are some of them:

  • Minimizes the likelihood of disputes because of the contractor’s strict compliance with the rules of the contract
  • Secures the contractor’s success
  • Promotes self-discipline and integrity

Read on to get the specifics of this bond!

The State of Alabama requires individuals or business entities to furnish this type of bond to ensure faithful completion of a contract in a manner that is approved by the obligee or the owner of the construction project. It is also needed to protect the obligee or financially compensate the obligee if needed.

This type of bond is also known as a Construction Bond. Both private and government construction projects require a surety bond.

In the case of government construction projects, the Miller Act requires that a bond is secured for projects exceeding $100,000.

The key parties of a contract bond will be the following:

Principal – The contractor who will be obtaining the bond from the surety bond company

Obligee – The owner of the construction project to whom the bond is obtained

Surety – the surety bond company that will shoulder the payment to the obligee in case the principal doesn’t fulfill his obligations

Types of Contract Bonds

A Contract Bond is further subdivided into different types. The primary contract bonds used in a construction project are as follows:

Bid Bond

A type of surety bond wherein the surety guarantees the obligee or the construction project owner that the principal will execute the contract awarded to him.

In case of non-compliance or if the principal abandons the project, the surety assures the construction project owner that he will be paid for the difference between the principal’s bid and the lowest amount the contract may be awarded.

Performance Bond

The surety guarantees the obligee that the principal will fulfill his contractual duties. If the principal fails to do so, the surety will pay the obligee the performance cost’s excess amount.

Payment Bond

The surety will assure the obligee that the principal’s construction workers, suppliers, and subcontractors will be paid. In most states, a payment bond is referred to as the Little Miller Act.


Other Types of Contract Bonds

Maintenance Bond

A warranty that will cover any defective materials used in the project or sub-standard workmanship for one year after the project’s completion.

Supply Bond

A guarantee that the necessary supplies needed for the construction project will be delivered on time.

What is the bond amount?

Both the amount of the bond and the conditions will depend on the full amount of the contract and the type of bond.

The Bid Bond amount is usually 5% up to 10% of the full contract amount. Performance bond amount, on the other hand, starts at 2.5%,  while a  Payment  Bond’s minimum amount is 3% of the contract amount.

If you want to get a tailored quote for your project today, you may obtain a FREE QUOTE HERE!

How can I obtain a Contract Bond?

You must first determine the kind of bond that your client requires. Once you have established that, you must submit a bond application.

The next step would be the underwriting process. An underwriter will evaluate pertinent information such as your financial history, construction company history, and your credit score.

Once that’s been satisfied, we will execute the bond and send it to you immediately.

Ready to get started on this bond? APPLY HERE! We look forward to partnering with you!

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