Bid Bond
BID BOND
_________________, referred to as BIDDER, of ______, ________, and ________________, referred to as SURETY, of ______, ________, are bound to _____________, of ______, ________, referred to as OBLIGEE, in the sum of $_______(_________________ &___/100 dollars), referred to as the penal sum for the payment of this sum we bind ourselves and our legal successors.
If OBLIGEE accepts the bid of BIDDER, and BIDDER enters into a contract with OBLIGEE in accordance with the invitation to bid, and further, give such performance bonds as may be required, then this obligation shall be void, otherwise the same shall remain in full force and effect. Provided, however, that upon the failure of the BIDDER to enter into the contract as described above, the BIDDER shall pay either the difference between the bid submitted by BIDDER and any larger amount which OBLIGEE may in good faith contract to perform the work, or the penal sum, whichever is lesser.
DATED: __________________
______________________________________________
BIDDER
______________________________________________
OBLIGEEBID BOND
Review ListThis review list is provided to inform you about this document in question and assist you in its preparation. This is a straightforward document used in real estate transactions.
1. Make multiple copies. Give one to each signatory and keep one with the file in question.
Frequently Asked Questions
What is a bid bond?
A bid bond is a legal instrument in which a bidder and a surety are bound to an obligee for a specified penal sum. It guarantees that if the obligee accepts the bidder's bid, the bidder will enter into a contract and provide any required performance bonds. If the bidder fails to do so, the obligation remains in effect.
Who are the parties involved in a bid bond?
The parties are the BIDDER, the SURETY, and the OBLIGEE. The BIDDER is the entity submitting the bid, the SURETY is the entity providing the bond, and the OBLIGEE is the entity requesting the bid. The bond binds the BIDDER and SURETY to the OBLIGEE.
What is the penal sum in a bid bond?
The penal sum is the maximum amount stated in the bid bond, expressed in dollars and cents. It represents the limit of the surety's liability under the bond. The penal sum is agreed upon by the parties and is specified in the bond document.
When does a bid bond become void?
The bid bond becomes void if the OBLIGEE accepts the BIDDER's bid, the BIDDER enters into a contract with the OBLIGEE in accordance with the invitation to bid, and the BIDDER provides any required performance bonds. If these conditions are met, the obligation is discharged. Otherwise, the bond remains in full force and effect.
What happens if the bidder fails to enter into the contract?
If the BIDDER fails to enter into the contract as described, the BIDDER must pay either the difference between the bid submitted and any larger amount the OBLIGEE may in good faith contract to perform the work, or the penal sum, whichever is lesser. This payment is the BIDDER's obligation under the bond. The surety may also be liable up to the penal sum.
What is the difference between a bid bond and a performance bond?
A bid bond guarantees that a bidder will enter into a contract and provide performance bonds if the bid is accepted. A performance bond, which may be required after the contract is awarded, guarantees the performance of the contract itself. The bid bond is a preliminary guarantee, while the performance bond is a guarantee of completion.
How is the penal sum determined?
The penal sum is determined by agreement between the parties and is stated in the bid bond as a specific dollar amount. It is written out in words and figures. The penal sum represents the maximum amount the surety may be required to pay under the bond.
What is the purpose of a bid bond?
The purpose of a bid bond is to ensure that a bidder will honor its bid and enter into a contract if selected. It protects the obligee from the risk that the bidder will withdraw or fail to perform. If the bidder fails to enter into the contract, the bond provides a remedy to the obligee.
Who is the obligee in a bid bond?
The obligee is the entity to whom the bid bond is given, typically the project owner or the party requesting the bids. The obligee is the beneficiary of the bond and can make a claim if the bidder fails to fulfill its obligations. The obligee is named in the bid bond document.
What is the surety's role in a bid bond?
The surety is the party that guarantees the bidder's obligations under the bid bond. If the bidder fails to enter into the contract, the surety may be liable to pay the obligee, up to the penal sum. The surety is bound jointly with the bidder to the obligee.
