Chapter 2 — Types of Surety Bonds
What Is a Warranty Bond?
A warranty bond, sometimes called a maintenance or defects liability bond, guarantees the correction of defects that appear after completion, during the warranty period stated in the contract.
What it covers
Once work is completed and accepted, the contractor usually remains responsible for defects in materials or workmanship for a defined period. The warranty bond gives the owner recourse if the contractor fails to carry out that corrective work.
It does not cover performance of the original construction — that was the performance bond's role — nor damage from causes outside the contractor's responsibility, such as misuse or third-party interference.
Amount and period
The bond amount is normally a percentage of the contract price, and the warranty period is set by the contract or by the applicable procurement rules, commonly running one year or longer for structures depending on the type of work. Read the contract; periods vary considerably.
Timing
The warranty bond is generally posted at completion, often as a condition of final acceptance or release of retention. Contractors who plan for it early avoid a cash squeeze at the moment they expect to be paid their final billing.
Documents commonly required
- Contract documents showing the warranty provision, amount and period.
- Certificate of completion or acceptance.
- Financial statements and registration documents.
- Signed indemnity documentation.
Practical points
Complete a proper punch list before final acceptance; unresolved defects at handover are the usual source of warranty claims. Keep as-built records, material certificates and maintenance instructions, since these are what establish whether a reported defect falls within your responsibility. Diarise the expiry date and request release afterwards so capacity is not tied up.
Requirements, terms and pricing are determined by the applicable insurer.
Key takeaway
A warranty bond backs post-completion defect correction for the contract's warranty period — plan for it before final billing and release it at expiry.
Related topics
Relevant bond information
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Important Notice
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