Utah Contractor Practice Exam

What guarantees both job completion and payment to subcontractors and suppliers?

1. Contract bond

2. Performance bond

3. Bid bond

4. Payment bond

The correct answer is: Contract bond

A contract bond refers to a type of bond that not only ensures that the project is completed as agreed upon in the contract but also guarantees that subcontractors and suppliers will be paid for their work and materials. In construction, this type of bond typically includes terms that protect all parties involved in the project, providing a safety net that ensures financial obligations are met. Performance bonds specifically cover the completion of the work according to the contract's specifications but do not directly ensure payment to subcontractors and suppliers. Bid bonds are utilized during the bidding process to protect the project owner from losses that might occur if the winning bidder fails to undertake the project as per the terms proposed. Payment bonds, while focused solely on ensuring that those who provide labor and materials are compensated, do not guarantee project completion in the same manner that a contract bond does. Thus, a contract bond is the most comprehensive form of assurance that encompasses both job completion and payment protections for all parties involved in a construction project, making it the appropriate choice in this context.