A. Bid Bonds
A bid bond or deposit is generally not required by statute.
However, bid bonds are a common feature of individual counties bid
applications. Generally, a bid bond is required from each bidder
equivalent to five percent of the bid price on contracts eaceeding a
certain dollar figure.
A certified check, bank letter of credit, or other negotiable
instrument accompanying a bid may often be used rather than a bid
bond. The forms of deposit stated above assure that a bidder,
upon acceptance of the bid, will execute contract documents in the
time specified. The deposit form, the percent of bid price, and
the length of time the deposit will be retained will vary.
B. Other Bonds
Two statutes identify the circumstances under which county
contracts are subject to a bond requirement: Minn. Stat. §
375.21 and § 574.26. These statutes set forth the types of
contracts for which a bond must be given and establish the bond
requirement necessary for a valid contract. Minn. Stat. §
574.26 requires the bond to be in the amount of the contract.
Minn. Stat. 375.21 requires a "sufficient bond." The
type of bond required under either statute may be characterized as a
performance bond in wich the surety agrees to complete or pay for the
cost of completion of a contract if the contractor defaults. In
addition, the bond required by § 574.26 may also be characterized as
a payment bond because it provides protection to subcontractors and
those furnishing labor and materials. Check special legislation
for specific counties' bonding requirements.
The statutues identifying bonding requirements are:
1. Minn. Stat. § 375.21:
Under Minn. Stat. § 375.21, the person to whom a contract is
awarded is required to give a sufficient bond to the county board for
the faithful performance of the contract. Thus, the type of bond
required is a "performance bond" which protects the county
against loss due to the inability or refusal of the contractor to
perform the contract. The type of county contracts for which a
bond is required under §375.21 are contracts for "work or labor,
or to purchase furniture fixtures or other property, or to construct
or repair roads, bridges, or buildings." (See Laws of
Minn. 1990, Ch. 389, deleting requirement of bonds for purchase of
furniture and fixtures, effective August 1, 1990.) Every contract made
without compliance of § 375.21 is void.
