Maintenance Bond

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Maintenance Bond

A bond that one company issues to another guaranteeing repayment in case some project fails to work properly after a certain period of time. For example, if a company hires a firm to build industrial equipment for a factory, the firm may issue a maintenance bond to the company. If the equipment is not constructed according to specifications and therefore does not function correctly, the company will not incur any losses because the firm must repay the bond. This reduces the risk to the bondholder that another party to a contract will not fulfill its obligations.
References in periodicals archive ?
Intercargo's Contract Surety Division underwrites a variety of bid, performance, payment and maintenance bonds for construction and other contract bonds as well as license and permit bonds, miscellaneous financial guarantees, court bonds and specialty fidelity bonds.
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