performance bond

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performance bond

A contractor obtains a performance bond before starting construction.

Definition
  1. Noun:
    • A financial guarantee: A performance bond is a type of surety bond issued by a bank or a surety company. It guarantees that a contractor or principal will fulfill their obligations according to the terms of a contract. If the contractor fails to perform, the bond protects the recipient (the obligee) from financial loss by providing compensation.
Usage
  • A is typically required in construction contracts, large service agreements, or government projects to ensure completion and compliance.
  • It is a risk management tool for the project owner.
  • The bond amount is usually a percentage of the total contract value.
Examples
  • Noun:
    • The city required the construction company to post a performance bond before beginning work on the new bridge.
    • If the supplier fails to deliver the equipment on time, we can make a claim against the performance bond.
Advanced Usage
  • "to call a performance bond": To make a formal demand for payment from the surety company because the contractor has defaulted.
    • After the builder abandoned the project, the client had to call the performance bond.
Variants and Related Words
  • Surety bond (n): A broader category of three-party guarantees that includes , bid bonds, and payment bonds.
  • Contract bond (n): Often used synonymously with .
  • Obligee (n): The party (e.g., project owner) protected by the .
  • Principal (n): The party (e.g., contractor) who purchases the bond and is obligated to perform.
  • Surety (n): The company (e.g., bank or insurance firm) that issues the bond and guarantees the principal's performance.
Synonyms
  • Completion bond: A bond ensuring a project is finished.
  • Contract guarantee: A general term for a financial guarantee related to a contract.
Related Phrases
  • "to secure a performance bond": To obtain the necessary bond from a surety provider.
    • The contractor spent a week securing the necessary performance bond.
  • "bonded performance": A state of being backed by a surety bond.
    • The client insisted on bonded performance for all major subcontractors.
performance bond

A contractor obtains a performance bond before starting construction.

Noun
  1. a bond given to protect the recipient against loss in case the terms of a contract are not filled; a surety company assumes liability for nonperformance

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