Contractor License Practice Exam

What is a bond that ensures that the activities on a construction project correspond to the permitted activities called?

1. Performance Bond

2. Permit Bond

3. Payment Bond

4. Surety Bond

The correct answer is: Permit Bond

A bond that ensures that the activities on a construction project correspond to the permitted activities is known as a permit bond. This type of bond is specifically designed to ensure compliance with local laws, ordinances, and regulations that govern construction projects. By obtaining a permit bond, contractors guarantee that they will adhere to the terms of their permits and perform the work according to the specified guidelines. If they fail to do so, the bond provides financial protection to the issuing authority, enabling them to recover costs associated with enforcement actions or to address violations of the permit. In contrast, the other types of bonds serve different purposes. A performance bond guarantees that a contractor will complete the project as per the contract terms and within the specified timeframe. A payment bond ensures that subcontractors and suppliers will be paid for their work and materials. Finally, a surety bond is a broader category that encompasses different types of bonds, including performance and payment bonds, but does not specifically address the compliance aspect of construction permits. Thus, the permit bond is the appropriate choice for ensuring that construction activities correspond to permitted activities.