Supply bonds provide security to the project owner, that certain materials will be delivered by the supplier according to the terms of the contract. The bond will reimburse the purchaser should the supplier not complete the terms of the contract. The conditions of supply bonds are similar to performance bonds except that the obligation is for supplies only.
Supply bonds may include extended warranty or maintenance conditions and may often be for extended periods of time. In addition – many supply contracts involve foreign buyers who want assurance that Canadian suppliers can deliver. If the product has unique qualities that no other supplier can duplicate – the surety requirements will be more demanding since it will be more difficult to negotiate alternative suppliers in the event of a default.
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