Bid bond-The surety guarantees the beneficiary that if the principal is the successful bidder on a contract, the principal will enter into the contract with the beneficiary and provide the appropriate security in the form of performance and payment bonds.
Performance bond- The surety guarantees to the beneficiary that the principal will perform its bonded obligations to the beneficiary under the bonded contract.
Payment bond-The surety guarantees to the beneficiary that the surety will pay those persons/entities that supplied labor or material in connection with the underlying bonded contract should the principal fail to do so.
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