NASCLA Study Guide Questions with Verified
Correct Answers
Performance Bond
Guarantees that the contractor will complete a contract with in its time frame and conditions
Payment Bonds
Guarantees subcontractors and suppliers that they will be paid for work if they perform
properly under a contract
Maintenance bond
Guarantees that for stated Typically one year no defective workmanship or material will
appear in the completed project
Completion bond
Provide assurance to the financial backers have a construction project but it will be completed
on time
Fidelity bond
Covers business owners for losses due to dishonest act by there employees
Lien bond
Guarantees that liens cannot be placed against the owners property by contractors for
payment of service
Sub contractors bond
Protects the general contractor in the event that subcontractors do not fully perform the
contract and or pay for labor and materials
, Bank letter of credit
Is not a Bond but is it cash guaranteed to the owner it is not a guarantee of performance but
can be converted to a payment to the owner by a bank or lending institution
Bid bond
Guarantees that the contractor if awarded the job will do the work at the submitted bid price
enter into a contract with the owner and furnish the required performance and payment bonds
What is a bond
Bonds provide protection in the event that the contractual obligation's are not met
Bond language
At a minimum Bond should contain the total dollar amount length of the bond requirements
for notice of the fact or lack of maintenance and bond enforcement
Filing procedures
Construction law contractual relationships govern the bond claims process the filing process
as outlined in the bond
Project changes
Unless specifically outlined in the bonds agreement the Surety company will not cover
changes to the original contract in most cases request for additional coverage must be made
and the bonding company must be notified of the contract changes
Payment in the event of default
In the event of default Surety may provide additional finances arrange for a new contractor or
hire subcontractors to complete the work or pay out the amount of the bond
Correct Answers
Performance Bond
Guarantees that the contractor will complete a contract with in its time frame and conditions
Payment Bonds
Guarantees subcontractors and suppliers that they will be paid for work if they perform
properly under a contract
Maintenance bond
Guarantees that for stated Typically one year no defective workmanship or material will
appear in the completed project
Completion bond
Provide assurance to the financial backers have a construction project but it will be completed
on time
Fidelity bond
Covers business owners for losses due to dishonest act by there employees
Lien bond
Guarantees that liens cannot be placed against the owners property by contractors for
payment of service
Sub contractors bond
Protects the general contractor in the event that subcontractors do not fully perform the
contract and or pay for labor and materials
, Bank letter of credit
Is not a Bond but is it cash guaranteed to the owner it is not a guarantee of performance but
can be converted to a payment to the owner by a bank or lending institution
Bid bond
Guarantees that the contractor if awarded the job will do the work at the submitted bid price
enter into a contract with the owner and furnish the required performance and payment bonds
What is a bond
Bonds provide protection in the event that the contractual obligation's are not met
Bond language
At a minimum Bond should contain the total dollar amount length of the bond requirements
for notice of the fact or lack of maintenance and bond enforcement
Filing procedures
Construction law contractual relationships govern the bond claims process the filing process
as outlined in the bond
Project changes
Unless specifically outlined in the bonds agreement the Surety company will not cover
changes to the original contract in most cases request for additional coverage must be made
and the bonding company must be notified of the contract changes
Payment in the event of default
In the event of default Surety may provide additional finances arrange for a new contractor or
hire subcontractors to complete the work or pay out the amount of the bond
