Contract
bonds guarantee the completion of
the obligation specified in an underlying
contract, including construction contracts,
supply contracts, etc. Contract bonds
are used as the security instead of
a bid deposit, contract deposit, cost
difference deposit, deposit for repair
of defects, repayment of the advance
payment, payment of the credit sales
price and others payments of guarantee.
A bid bond is used as
a security instead of
a bid deposit and is accompanied
by a construction contract
or supply contract, etc.
Principal
(Contractor)
The
bid participant (Bidder)
Beneficiary
(Obligee)
The owner of the project
Loss
Coverable
The
loss (Bond Amount) occurring
in case the successful bidder
does not enter into an underlying
contract or in case there
are reasons for the Obligee
to withdraw the bid during
the period of bid validity
specified in the bidding
documents.
Bond
Period
Commences
on the day before the bidding
date, and the expiry date
shall be more than 30 days
after the bidding date.
Bond
Amount
On
public works, not less than
5% of the bid amount according
to The National Contract
Law or The Budget and Account
Law. On private works, 5%
or more of the amount of
the bid. The limit is the
amount of the bid.
Performance Bond
A Performance Bond is
used as a security instead
of a contract deposit
and is accompanied by
the construction contract
or supply contract, etc.
Principal
(Contractor)
The
person having to provide
a contract deposit.
Beneficiary
(Obligee)
The recipient of the contract
deposit.
Loss
Coverable
The
loss (Bond Amount) in case
the Principal fails to perform
the obligation(s) stipulated
in the underlying contract.
Bond
Period
Commences on the date of
the contract and expires
on the date performance
is completed as prescribed
in the written contract.
However, for public works,
60 days should be added.
Bond
Amount
On
public works, not less than
10% of the contract price
according to The National
Contract Law or The Budget
and Account Law. On private
works, 10% or more of the
contract price in compliance
with the written contract.
The limit is the contract
price.
Maintenance
Bond
A Maintenance Bond is
used as a security instead
of a deposit for repair
of defects, maintenance
repairs or corrective
changes within the maintenance
and warranty period after
the completion and inspection
of the work in the underlying
contract.
Principal
(Contractor)
The
person having to provide
a maintenance deposit.
Beneficiary
(Obligee)
The recipient of the maintenance
deposit.
Loss
Coverable
Any
loss occurring in case the
Principal is requested to
make maintenance repairs
or corrective changes for
any defect(s), but does
not make them, as stipulated
by the underlying contract.
Bond
Period
Commences
on the date the inspection
is done after the completion
of the work or supply and
expires on the date the
maintenance period is finished.
However, for public works,
60 days should be added.
Bond
Amount
2~5%
of the contract price for
public works according to
The National Contract Law
or The Budget and Account
Law. For private works,
1-30% of the contract price
as required by the Obligee.
The limit is 30% of the
contract price.
Cost Difference
Bond
The Cost Difference Bond
is used as security instead
of a cost difference deposit
in the case the Principal
has been awarded the contract
for an amount less than
the estimated figure.
Principal
(Contractor)
The
person having to provide
a balance deposit.
Beneficiary
(Obligee)
The recipient of the balance
deposit.
Loss
Coverable
The
cost difference between
the Obligee¡¯s estimated
amount and the awarded amount
in case the Principal has
been awarded the contract
for an amount less than
the estimated but fails
to perform the underlying
contract.
Bond
Period
Commences
on the date of the contract
and expires on the date
performance is completed
as prescribed in the written
contract. However, for public
works, 60 days should be
added.
Bond
Amount
The
difference between the estimated
and the awarded amount.
The limit is two times the
difference between the estimated
and the awarded amount.
Advance Payment Bond
It is used as a security
to repay the advance payment
or pay for or return the
advanced materials and
is accompanied by a construction
contract or supply contract,
etc.
Principal
(Contractor)
The
person having to provide
an advance payment deposit
or advance materials deposit.
Beneficiary
(Obligee)
The recipient of the advance
payment deposit or advance
materials deposit.
Loss
Coverable
Any
loss occurring in case the
Principal fails to repay
the advance payment or pay
for or return the advanced
materials when the Principal
fails to perform the obligation(s)
stipulated in the underlying
contract.
Bond
Period
Commences
on the date the advance
payment is made, and expires
on the date the performance
is completed. In the case
that a homestead period
is stated in the relevant
law or main contract, the
expiry date will be extended
to end of the homestead
period
Bond
Amount
The
amount of advance payment
in addition to the dues
prescribed in the underlying
contract. 5~15% of the contract
price.
Refund Guarantee
The Refund Guarantee provides a ship buyer with a 100% guarantee to insure against any loss in the event the shipbuilder fails to perform its obligations as stipulated in the underlying contract.
Principal
(Contractor)
The shipbuilding company
Beneficiary(Obligee)
The ship buyer
Loss Coverable
The installments of the contract price will be returned to the buyer if the shipbuilders fail to deliver ships as stipulated under the contract.
Bond Period
Commences on the date the first installment is paid and expires on the date the ship is delivered
Bond Amount
The total amount of the installments including the interest in accordance with the terms of the contract.
Design
and Supervision Bond for
Architects & Engineers
Any loss that the Obligee
may suffer in case the
Principal negligently,
whether intentional or
not, does not perform
his job in the design
or supervision of the
Underlying contract. The
loss amount will be determined
in court.
Principal
(Contractor)
The
party responsible for
the planning and supervision
as stipulated by the main
contract.
Beneficiary
(Obligee)
The (owner) company/authority.
Loss
Coverable
Any
loss occurring in case the
Principal fails to plan
or supervise the obligation(s)
stipulated in the underlying
contract.
Bond
Period
Commences
on the start date of construction
and expires on the date
the construction is completed.
Bond
Amount
The
amount required by the Obligee.
Material
Qualification Bond
Principal
(Contractor)
The
party responsible for
the supply of parts/materials.
Beneficiary
(Obligee)
The party receiving the
parts/materials.
Loss
Coverable
Any
loss occurring in case the
parts/materials provided
by the Principal has defects,
poor quality, etc.
Bond
Period
Commences
on the date of Delivery
and expires on the date
the parts/materials is received.
Bond
Amount
The
amount according to the
value of the parts/materials.
Construction
Performance Bond
The Construction Performance
Bond is required in the
event the construction
project is over 50 Billion
Won and is categorized
as a difficult construction
project (i.e. dams, bridges,
etc). Also, contractors
under go extensive pre-qualification
analysis before they are
selected. In the event
of a claim the Surety
has the option of either
paying the claim in cash
or completing the construction
project.
Principal
(Contractor)
Construction
Company
Beneficiary
(Obligee)
Governmental Bodies or Contract
Owner
Loss
Coverable
Any
loss caused in the case
the Principal fails to perform
the obligations as stipulated
by the underlying contract.
Bond
Period
The
length specified in the
contract.
Bond
Amount
40%
of the contract price.
Sale in Lots Bond
The Sale in Lots Bond
is used as security in
the event the Beneficiary
provides monetary funds
for the Principal to build
office building(s) and
the Principal fails to
complete the construction
of the office building(s)
or does not sell the office
space to the Beneficiary
as required in the underlying
contract.
Principal
(Contractor)
The
party that builds office
building(s) intended for
sale in lots and must
provide a bond.
Beneficiary
(Obligee)
The party that makes a contract
with the Principal to purchase
sale in lot property.
Loss
Coverable
Any
losses arising out of the
Principals failure to uphold
obligations as stipulated
in the contract for sale
on lots.
Bond
Period
Commences
on the start of sale in
lots construction and expires
on the expected move-in
date of the beneficiary.
What are Contract Bonds
