Bonds

Bonds or guarantees are used on many construction projects in order to provide security to the employer against contractor non-performance. There are several types of bond including performance bonds, retention bonds and advance payment bonds. For more on performance security documents in construction generally, see Practice Note: Performance security in construction.

Performance bonds

There are essentially two categories of performance bond—the default (or conditional) bond and the on demand bond.

A performance bond is a contract entered into between a bank or insurance company (surety) and an employer, whereby the surety accepts liability for the performance of the contractor under a building contract. Typically for UK construction contracts the value of the bond will be 10% of the contract value.

The requirement to provide a performance bond typically arises from a provision of the building contract and is often a pre-condition to the employer entering into the building contract. The form of bond is usually attached to the contract and is in a form which is satisfactory to the employer. For more information, see Practice Note: Performance bonds—construction projects. For an example performance

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Construction weekly highlights—24 July 2025

This week's edition of Construction weekly highlights includes the Court of Appeal (CoAs)’s decision in relation to NHBC Buildmark Choice policies confirming that the cause of action accrues when the insured party ‘has to pay more’ to complete the building work as a result of contractor insolvency (National House Building Council v Peabody Trust), Construction Leadership Council (CLC) guidance on Building Control Approval Applications for new higher-risk buildings, Ministry of Housing, Communities and Local Government (MHCLG) guidance on the Building Safety Levy, MHCLG’s announcement of legal deadlines for landlords to remediate unsafe cladding in social housing, a Royal Institution of Chartered Surveyors (RICS) consultation on it updated cladding valuation standard, a British Standards Institution (BSI) consultation on a new code of practice for bringing safe construction products to the market, a Technology and Construction Court (TCC) decision enforcing an adjudicator’s decision to award the responding party in the adjudication the notified sum (VMA Services v Project One), a CoA decision providing guidance on "costs directly incurred" in a waste management project agreement (Buckinghamshire Council v FCC Buckinghamshire Ltd), an update on the status of the Planning and Infrastructure Bill together with updated guidance from MHCLG on the same, the National Infrastructure and Service Transformation Authority (NISTA)’s interactive Infrastructure Pipeline tool, and publication of the Welsh Government’s circular on updated building control profession standards and codes.

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