Chapter 12 - § 12.7 • GLOSSARY

• Jurisdiction: Colorado

§ 12.7 • GLOSSARY

Bid Bond. The condition of a bid bond is that if the principal's bid is accepted, the principal will (1) enter into the contract and (2) provide the payment and performance bonds required by the contract.

Bond Application. The bond principal's application to the surety for a bond. Bond applications generally require detailed information about contract terms and conditions, the bond principal's financial condition, and workload. Short-form bond applications sometimes include an indemnity agreement.

Bond Line. When a working relationship has been established between a contractor and surety, the surety may determine a contractor has sufficient knowledge and financial capacity to contemporaneously perform multiple construction contracts. A "bond line" or "bond line of credit" means that the principal has pre-qualified for bonding for a specific amount of work in progress. Qualification for a bond line enables the surety to act promptly when it receives new bond applications.

Bond Over. Substitution of a bond for the security represented by a lien upon contract funds or property, such as in bonding over C.R.S. § 38-26-107 public works liens with a bond under C.R.S. § 38-26-108 or bonding over a mechanics' lien under C.R.S. § 38-22-131.

Completing Surety. A performance bond surety that elects to physically complete its principal's contract is a "completing surety." The completing surety usually performs the remaining scope of work under a separate contract with a completion contractor.

Completion Contractor. A contractor hired by a performance bond surety to complete a bonded contract.

Condition of the Bond. The condition of the bond is a description of the circumstances that give rise to the liability of the surety. The conditions are typically found in a clause stating that the bond is "void" and of "no force and effect" if the primary obligations of the principal are performed. In the absence of performance, the bond remains in full force and effect.

Co-sureties. When a bond is issued by more than one surety, the sureties are "co-sureties." Co-suretyship is most likely to occur on large construction contracts where the face amount of the bond is so significant that a single surety cannot undertake the risk.

Default. The principal's failure to perform in accordance with the terms and conditions of a bond.

Dual Obligee Bond. A bond that runs to the benefit of two obligees. This frequently occurs when both the owner and the construction lender...