Bonds in construction provide security by guaranteeing that a contractor will complete a project according to the terms and conditions outlined in the contract. This can provide a level of assurance to the owner of the project that the contractor will fulfill their obligations and that the project will be completed on time and within budget.

Bonds can also provide security for subcontractors and suppliers, by guaranteeing that they will be paid for their work on the project. This can provide a level of assurance to these parties that they will be compensated for their work, even if the contractor is unable to pay them including the event of insolvency.

Performance bond, for example, is a type of bond that guarantees that the contractor will complete the project according to the terms and conditions outlined in the contract. If the contractor fails to do so, the bond issuer will pay the owner for any resulting damages or losses. This can provide security to the owner of the project, as they will be compensated if the contractor fails to complete the project as promised.

Payment bonds, on the other hand, guarantees that the contractor will pay all subcontractors, suppliers and labourers for their work on the project. This can provide security to these parties, as they will be compensated if the contractor is unable to pay them.