TCM 320 Exam 2 Questions & Answers
(Grade A+)
What are the three types of Performance Guaranty? -
correct answer ✅True Performance- most common
On-Demand Bonds- issued by bank
Standby letter of credit- between bank, owner, contractor
What are surety bonds? -
correct answer ✅An assurance to the owner that the contractor
will perform the work within the specified contract and pay certain
subcontractors and suppliers.
What is an indemnity agreement? -
correct answer ✅It separates the surety and contractor
Spells out terms of the guarantee, the fee, and who or what level
the losses must be paid back
What is the difference between a surety bond and an insurance
contract? -
correct answer ✅Surety always gets their money back
What is a good comparison for a surety bond? -
correct answer ✅a bank making a loan
,TCM 320 Exam 2 Questions & Answers
(Grade A+)
What is a bond often used for in construction? -
correct answer ✅It is often used as a contractor as a form of
contractor prequalification
Why do companies have surety bonds? -
correct answer ✅It is often required by the project
Excessive overhead
Low profit margins
Poor cash flow management
Poor schedule management
What type of business is the most common to go out of business? -
correct answer ✅Restaurants
Who requires bonds? -
correct answer ✅Federal
State & Local
Private Owners
Lending Institutions
General Contractors
, TCM 320 Exam 2 Questions & Answers
(Grade A+)
What is the Miller Act (1935)? -
correct answer ✅Provides for performance and payment bonds
for projects >$100k
First tier and second tier contractors can sue
What are the three parties to a surety bond? -
correct answer ✅Principal(Contractor or sub)
Obligee (Owner)
Surety (bonding co. or Obligor)
What is the penal sum? -
correct answer ✅A bond guarantees a contractor's performance, a
penal sum is a monetary limit to the bond
What is the premium? -
correct answer ✅It is a fee the contractor pays to the bonding
company (usually 1-2%)
What is an Indemnitor? -
correct answer ✅The person(s) who are responsible for paying the
bonding company back should there be a failure
(Grade A+)
What are the three types of Performance Guaranty? -
correct answer ✅True Performance- most common
On-Demand Bonds- issued by bank
Standby letter of credit- between bank, owner, contractor
What are surety bonds? -
correct answer ✅An assurance to the owner that the contractor
will perform the work within the specified contract and pay certain
subcontractors and suppliers.
What is an indemnity agreement? -
correct answer ✅It separates the surety and contractor
Spells out terms of the guarantee, the fee, and who or what level
the losses must be paid back
What is the difference between a surety bond and an insurance
contract? -
correct answer ✅Surety always gets their money back
What is a good comparison for a surety bond? -
correct answer ✅a bank making a loan
,TCM 320 Exam 2 Questions & Answers
(Grade A+)
What is a bond often used for in construction? -
correct answer ✅It is often used as a contractor as a form of
contractor prequalification
Why do companies have surety bonds? -
correct answer ✅It is often required by the project
Excessive overhead
Low profit margins
Poor cash flow management
Poor schedule management
What type of business is the most common to go out of business? -
correct answer ✅Restaurants
Who requires bonds? -
correct answer ✅Federal
State & Local
Private Owners
Lending Institutions
General Contractors
, TCM 320 Exam 2 Questions & Answers
(Grade A+)
What is the Miller Act (1935)? -
correct answer ✅Provides for performance and payment bonds
for projects >$100k
First tier and second tier contractors can sue
What are the three parties to a surety bond? -
correct answer ✅Principal(Contractor or sub)
Obligee (Owner)
Surety (bonding co. or Obligor)
What is the penal sum? -
correct answer ✅A bond guarantees a contractor's performance, a
penal sum is a monetary limit to the bond
What is the premium? -
correct answer ✅It is a fee the contractor pays to the bonding
company (usually 1-2%)
What is an Indemnitor? -
correct answer ✅The person(s) who are responsible for paying the
bonding company back should there be a failure
