The purpose of a bid bond is to protect the owner of a project from the alterations of a bidding process for large construction projects. Bid bond is a specific type of suretyship wherein the surety is required to pay in an event the principal does not pay. Thus, a surety enjoys very few defenses which are diverse and different from defenses of the principal. A bid bond is instrumental in protecting such owner in an event that the successful lowest bidder is unwilling or unable to obtain necessary performance.
It should be mentioned here that damages may arise from the difference between the principal’s bid and the next highest bid. Damages can also be set as a percentage of the principal’s bid. Further, damages may be a result of the difference between the principal’s bid and the very next highest bid.
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