Bid Bonds definition

A bid bond is a bond where the contractor i.e. the principal guarantees the obligee i.e. the owner, that the principal will honor the bid and the sign the contract, if bid is awarded. In default of the bid the owner may sue both the obligator i.e. the principal and the surety. This bond guarantees that the bidder will carry on the contact at the bid price if bid is awarded. If the bidder is allowed to take away the bid before granted, no action may be taken against the bidder or bid security. The bid bond generally indemnifies the faithful performance with regards to the bid.