Anyone involved in the construction or contracting industries knows the importance—and the sometimes-unfortunate complexities—of surety bonding. Getting bonded carries so many benefits for your business, and may even be a legal requirement, depending on the work and individual project you’re pursuing. There’s also a ton of different kinds of bonds, and it can be tricky to understand which ones you need for any given purpose.

Two of the more important and common kinds of bonds are commercial and contract surety bonds, and it’s very important to choose the right one for your job. They overlap a great deal, but there are key differences that will make a difference. Let’s look at the important differences between commercial bonds vs contract bonds, and discover where you can go to cut through the complexities and get bonded!

Commercial vs Contract Bonds

Contract bonds and commercial bonds are, put simply, the two major classifications for surety bonding, and you need to choose the right one for your business. While contract bonds generally include payment and performance bonds, it’s also possible to get them mixed up, as sometimes, a commercial bond will be referred to as a performance bond.

Thus, it’s important to look at major differences between the two.

When You Need Contract Bonds

If there’s a formal contract in existence for the service being delivered, you’ll need a contract bond. That may seem obvious, but even still, sometimes there are gray areas. Contract bonds represent a bilateral agreement between the parties in a contract, and if the party requiring the bond doesn’t perform, the bond can be voided entirely.

In general, contract bonds cannot be canceled, but they are bound by the terms of the contract in question. Finally, they guarantee performance and completion of work to the oblige.

When You Need Commercial Bonds

When there are legal statutes in place requiring a bond, in general this will be a commercial bond. Still, some states also require contract bonds by law, particularly for high-value government contracts.

In addition, commercial bond imposes a unilateral and complete obligation on the part of the principal, or the party who posts the bond. They are generally in place for a set term, but often can be canceled by the surety company backing the bond. Finally, these bonds, which are also called license bonds and permit bonds, are there to ensure public benefit. They require compliance with all permit and licensing qualifications under the law.

Deciding between Contract vs Commercial Bonds

It can be tricky to determine whether you need contract vs commercial bonds. Your best option in any case is to work with a knowledgeable, experienced and expert surety bonding agency. For decades, National Surety Services, Inc., has been helping businesses all over the nation get proper bonding for their business, and we’re ready to help you. We pride ourselves on a fast, easy process that gets you up and running with the big boys in no time at all. Check out the complete range of surety bonding services we offer, and get started on your commercial vs contract bonds process today!

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