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Advance Payment Bond
This surety bond is different than a Performance Bond Payment Bond It is a written statement given by the contractor that
he will repay or settle the advanced cash paid by the
owner related to contract. This bond ensures that the
principal will perform his obligation as mentioned in
the contract. If he fails to perform his obligation,
then this bond makes the obligator to repay the advance
as per contract. Mostly, this bond has been used by
the overseas buyer to returning their advance in failure
of the contract.
In case of export, the importer gives advance to the
exporter to complete his contract. Due to this payment
he gets a statement from the exporter that, if he fails
in his commitments, he will repay the advanced amount
given by the importer. Generally every importer will
insure upon this statement to get back his fund. In
above case the advanced guarantee his obtained from
the exporter. The amount covered by this statement is
usually 10-30% of the contract price.
The Advanced Payment bond is used by the building contractors to fulfill
his contract within the contract period. If any loss
incurred to the purchaser, then the loss will be covered
by the insurance company. Surety Company will cover
the loss only when the builder cannot able to use the
down payment given by the customer or the builder cannot
able to refund the amount given by the customer. Insurance
company will not cover the loss, when the builder fails
to perform his obligation or is unable to complete his
contract due to war, terrorism etc.
Benefits of the Advanced Payment bond:
This ensures the importer or the customer or the owner
that he will perform his obligation as mentioned in
the contract .if any failure happens, and then the importer
can get back his money as per the bond. Advance payment
bond insures the contractor to complete his contract
as per the agreement. Business that need a this surety bond usually need a contractor license bond to be registered with the state
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