Why security is given

A principal (or head contractor) may require security from a contractor (or subcontractor) to provide a backstop for the performance of contractual obligations. The security may be called upon if the contractor defaults under the construction contract.

The contractor may also insist that the principal provides security for its payment obligations, particularly where the principal is not a substantial company.

Security may also be required where the contractor seeks payment for goods or
materials that have not yet been incorporated into the project works.

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