Bonds, Insurance & Legal Terms

Question 1

Payment bond

Answer 1

A bond secured by the General Contractor which guarantees that the Owner will not pay twice for labor and materials.

Question 2

Bond (Surety Bond)

Answer 2

An agreement under which on party (the surety or bonding company) guarantees to make good to another party (the oblige or owner) the debt, default, or failure to perform of a third party (the principal or contractor).

Question 3

Completion Bond

Answer 3

A bond obtained by the contractor or owner, which guarantees that the project will be completed free of liens.

Question 4

Performance Bond

Answer 4

A bond, secured by the General Contractor, which guarantees that the project will be completed. • A type of surety obtained by the contractor. • It is for the protection of the owner and is used to help ensure that the work will be completed in accordance with the contract documents.

Question 5

Bid Bond

Answer 5

• A bond, secured by the bidder, which guarantees that the Owner will contract for the project for the bid proce as noted in the accepted bid.

Question 6

Labor and Material Payment Bond

Answer 6

• Who Gets it > Contractor • Who it Pays > Subcontractors • Who it Protects > Owner • A bond acquired by the contractor in which the contractor and the contractor’s surety guarantee to pay their subcontractors and to purchase materials for the construction. • The purpose of the Labor and Material Payment Bond, is to protect the owner from claims made for unpaid contractor’s bills after final payment has been made, and to, provide a means to discharge liens that are files after the completion of the project. • AIA Document A312

Question 7

Affidavit

Answer 7

A written statement of facts voluntarily made by an affiant under an oath or affirmation administered by a person authorized to do so by law.

Question 8

Lien

Answer 8

A legal clain by a party against another party for satisfactionh of a monetaqry claim.

Question 9

Surety

Answer 9

• A written promise or bond by a person or entity who guarantees the performance of an obligation of another party. • It can protect an owner’s interest by ensuring that the contractor fulfills the requirements of the contract documents.

Question 10

Errors and omissions insurance

Answer 10

Insurance obtained by the Architect as protection against errors and omissions in the preparation of the Contract Documents.

Question 11

Builder’s Risk Insurance

Answer 11

A specialized form of property insurance that provides coverage for loss or damage to the work during the course of construction.

Question 12

Bonus and Penalty Clause

Answer 12

A provision in the construction contract for payment of bonus to the contractor for completing the project prior to a specific date , and for a charge (penalty) against the contractor for failing to complete the project by that date.

Question 13

Incentive Clause

Answer 13

Clause in a cost plus fee contract between the owner and the contractor in which the savings between the guaranteed maximum cost and the actual project cost are proportionally shared.

Question 14

Letter of intent

Answer 14

A letter signifying intention to enter into a formal agreement and setting forth the general terms thereof.

Question 15

Liquidated Damages

Answer 15

A sum chargeable against the contractor as reimbursed for damages suffered by the owner because of the contractor’s failure to complete the work within a specified time.

Question 16

Professional Liability Insurance (Errors and Omissions Insurance)

Answer 16

Insurance that financially protects an architect against claims for damages resulting from professional negligence.

Question 17

Eminent Domain

Answer 17

The right of the government to take private property for public use, with the owner receiving fair compensation

Question 18

Discount

Answer 18

(Loan Placement Charge / Origination Fee / “Points”) That portion of a construction loan that must be paid to the lender for the privilege of borrowing the money.