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.

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