Italy: Bid Bond: How To Negotiate It

Last Updated: 13 September 2017
Article by Elisabetta Ventrella

The Bid Bond guarantees the Employer that the bidder will sign the contract, if awarded, or will comply with other specified obligations (such as to issue other bonds as provided in the bidding documentation). They are rather frequent, especially in mid/big size projects.

Among the several bonds normally used in construction contracts, the Bid Bond does not represent a big risk for the Contractor/bidder provided that he has carefully ascertained all the bidding conditions and documents and he is really willing to sign the contract and execute the construction works if the contract is awarded to him.

The Bid Bond normally is issued in the form of an on-demand bond in a percentage between 1% and 5% of the contract value, but the percentage can reach even the 10% of the contract value in certain cases.

A. How it works

Generally, the Bid Bond can be called by the Employer in the case the winning bidder does not enter into the construction contract (if and when awarded) but can also be called in the case the winning bidder does not comply with other obligations after the award of the contract.

As it is the case also for the other bonds normally used in construction contracts (such as the Advance Payment Bond, the Performance Bond or Warranty Bond) the Bid Bond is normally issued in the form of an on-demand bond (ie a bond which can be called by the Employer without the need to demonstrate the actual default or breach of the Contractor and the payment of which is made by the guarantor upon simple request from the Employer).

The reason is rather simple being that with this type of bond, the Employer does not even need to start a legal action to receive the payment of the guarantee.

It goes without saying that when a bid process is launched, the Employer will incur costs for the bidding process itself and an on-demand bid bond guarantees the Employer that he will recover at least all the costs incurred for the bidding process.

In such cases, the Employer will simply need to 'declare' that the Contractor has breached certain obligations under the contract (or under the bidding documents) and the guarantor will be under the obligation to pay without any objection.

It is clear therefore that the real risk here is not specific to the Bid Bond but instead to the form that the bond will have (as said, if issued in the form of an on-demand guarantee).

The winning bidder seldom will have arguments or objection to prevent the guarantor from paying the bond except in the case the bond has been called in bad faith (or fraudulently) by the Employer (say for instance that the Employer changes substantial clauses of the contract after it has already been awarded to a Contractor who consequently does not intend to sign the contract).

B. 5 Tips to reduce the risks for the Contractor

As Contractor, there are few tips that can reduce your risks of a fraudulent calling of the Bid Bond:

  • ASCERTAIN that the events which entitle the Employer to call the bond are clearly identified in the text of the bond and are limited to the failure to sign the construction contract for no reason;
  • ASCERTAIN how the amount that can be called is calculated, if it is not already fixed in the bidding conditions. In theory, in fact, the bid bond should cover only the actual costs incurred by the Employer to start the bidding process again or to select a second bidder. It is not rare however that the Employer will seek to recover also the difference between the price offered by the original winning bidder (who has not signed the contract) and the higher price offered by the new bidding winner;
  • MAKE SURE that the Bid Bond will expire automatically (even in the case the original document representing the bond is not handed over back to the Contractor) once the contract is signed or, as maximum, once the Contractor has issued the Performance Bond;
  • VERIFY is the Bid Bond is in the form of an on-demand bond or a conditional bond and try to negotiate the issue of a conditional bond;
  • INSERT a clause, if the guarantee will be issued in the form of an on-demand bond, which obliges the Employer to clearly state (when calling the bond) that the winning bidder has not signed the construction works without grounded reasons (such statement will be of the utmost importance in the case of fraudulent calling of the bond).

C. Conclusions

The Bid Bond is a guarantee rather frequent in mid and big size projects which secures a legitimate interest of the Employer and prevent the submission of offers from unqualified bidders of from contractors which are not actually willing to sign the contract and execute the works.

At the same time if the Bid Bond is issued in the form of an on-demand bond it can be open to abuse from the Employer who (acting in bad faith) can call the bond being aware that he is not entitled to obtain the payment.

A careful analysis of the entire text can allow the Contractor to minimise the risk of an unfair or fraudulent calling of the Bid Bond.




The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Mora & Associati – Studio Legale
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions