ABSTRACT
In construction, bonds are typically used as security for performance of the contractor but increasingly are provided as an alternative to a retention and also security for the employer's performance. Many modern bonds and, in particular, performance bonds in respect of construction contracts are what have become known as 'conditional' bonds, which are similar to the old 'double' bond. A performance bond for a construction project will need to be related to a breach of the contractor's obligations under the building contract. A bond is closer in nature to a guarantee than it is to a contract of insurance, as bond provides security for performance, similar to a guarantee and the contract of insurance provides indemnity against certain risks occurring. In contrast with the position at common law where a claim fraudulent in amount is made under an insurance policy, the fact a demand under a bond is fraudulent in amount does not entitle refusal of the amount truly due.
