Which bond guarantees that contractors will fund projects free of liens or encumbrances?

The correct choice is a Completion Bond, which serves a specific purpose in the construction industry. This bond ensures that the contractor will complete the project in accordance with the terms of the contract and, importantly, that they will do so without creating any liens or encumbrances on the property. By providing a guarantee that the project will be finished and that the property will remain free of financial claims from subcontractors or suppliers, the Completion Bond protects the interests of the property owner and any stakeholders involved in the project.

Understanding the role of a Completion Bond is essential, as it not only facilitates the smooth execution of construction projects but also instills confidence in property owners that they will receive the expected finished work without any legal complications. This assurance is crucial in the construction sector, where financial disputes over payments can arise frequently.

The other options do not serve this particular function. License and Permit Bonds are generally required to ensure that businesses and contractors comply with state laws and regulations but do not guarantee the completion of a project free of liens. Court Bonds are utilized in legal settings, such as ensuring the performance of court orders, and Supply Bonds are intended to ensure suppliers are paid for materials and goods but do not guarantee project completion or that it will be free of liens.