Construction available bondsAdvance payment bond
This guarantee protects the beneficiary, who makes an advance payment to the contractor. A refund of the advance payment is guaranteed if the contractor does not fulfil the terms of the contract.
This guarantees the beneficiary that the principal debtor will honour its bid and will sign all contract documents if awarded the Contract. This offers limited protection to the employer for costs incurred. It is the most common form of bond.
The guarantor undertakes to pay a specified sum of money to the beneficiary if the contractor does not fulfil the contractual obligations. Normally 10% to 20% of the contract sum, but can be as low as 1%.
Under the primary contract the beneficiary is permitted to retain a certain percentage of the payment due to the contractor, normally 5% to 10%, as a safeguard against latent defects. In order to secure the release of these retention monies, the contractor will apply for a retention guarantee.
The guarantor undertakes to pay a specified sum of money to the beneficiary, who is Zambia Revenue Authority (ZRA) by reason of improper use of dutiable goods and or the non-payment of duties by importers or exporters of goods. The following are the various customs bonds issued by African Grey Insurance Company:
- Removal in transit bond
- Warehouse bond
- Export guarantee bond
Bonds are not insurance contracts as such. These are purely financial undertakings which have nothing to do with insurance contracts. A bond is a written undertaking issued by an insurance company (African Grey) in favour of the receiver (Employer or Beneficiary), whereby the insurance company pledges to make certain payments on behalf of its client (contractor), if the latter fails to make payment or to carry out specific functions in terms of construction.
Parties to a bond contract
There are three parties to a bond contract, namely:
The insurance company (African Grey) that issues the guarantee.
Protected party (Obligee or beneficiary or employer) The party who will suffer financial loss if principals do not execute all their duties properly.
Principal (Obligor or bidder or contractor) The party who is empowered by the protected party to carry out specific functions and duties in an official capacity which if not done properly for any reason will require the surety to pay up to the amount of the bond to the protected party.