construction bond

Definition

A form of a surety bond specific to construction that guarantees the performance of the builder, or principal, according to project specifications. The bond amount, or penal sum, is stated in terms of the cost to complete the project. If the principal fails to deliver upon the contract, the owner, or obligee may sue the surety and the principal for the means to complete of the project.

Use construction bond in a sentence

Since the highway project was going to be both expensive and lengthy, a great deal of construction bonds were sold to investors in order to make sure funds were available.

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