A supply bond provides a guarantee that a supplier will provide the materials required by their purchase agreement. It’s a form of a contract bond with the purchase agreement being the contract. The bond is issued by a surety on behalf of a supplier, and it’s too the benefit of whoever ordered the materials. In most cases, once the materials are delivered to the buyer then the obligation under the bond is met, but it will always depend on what’s in the contract.
The limit of liability on the performance bond is typically 100% of the purchase agreement. If there’s a claim, the surety can elect to complete the remaining portion of the contract or they can simply pay the penal sum amount of the bond.
A supply bond is NOT an insurance policy. If the surety pays a claim on a performance bond they’ll look to the supplier for reimbursement. This can be confusing because it’s usually a large insurance company that acts as the surety, but it’s really a lot more like getting a line of credit at a bank than getting insurance.
Although the supplier is responsible for posting the bond, the supply bond is written to the benefit of the owner which can be a contractor, a private entity owner, a State or municipality, or any other entity that orders material supplies.
Can Baldwin Cox Allen help with supply bonds?
We can absolutely help! Baldwin Cox Allen has been specializing in bonds since we opened our doors in 1989. We have access to over 30 well established, “A” rated and Treasury Listed sureties and we’ll search the market for the right fit for your unique needs. We’ll work hard to get the bonds approved for you, and then continue to work to improve your program and maximize your bonding capacity! capacity!