Bid bond

A bond or guaranty, which has been issued as security for one party´s bid. If that party, known as the principal, wins the biding process and then fails to take up the resulting contract, the beneficiary may obtain payment under the bond guarantee. Bid bonds are usually worded to cancel automatically if the principal is not a successful bidder, or if successful, takes up the contract. See guaranty; performance bond; surety.

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