Definition of Performance bond:
A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. It is also referred to as a contract bond. A performance bond is usually provided by a bank or an insurance company to make sure a contractor completes designated projects.
A written guaranty from a third party guarantor (usually a bank or an insurance company) submitted to a principal (client or customer) by a contractor on winning the bid. A performance bond ensures payment of a sum (not exceeding a stated maximum) of money in case the contractor fails in the full performance of the contract.
Performance bonds usually cover 100 percent of the contract price and replace the bid bonds on award of the contract. Unlike a fidelity bond, a performance bond is not an insurance policy and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor. Also called standby letter of credit, contract performance bond.
A bond issued by a bank or other financial institution, guaranteeing the fulfillment of a particular contract.
The Miller Act instituted the requirement of placing performance bonds. The Act covers all public work contracts $100,000 and above. These bonds are also required for private sectors that necessitate the use of general contractors for their company's operations.
How to use Performance bond in a sentence?
- Examples of this were inserting into the requirements for the performance bond and guarantee the requirement that they be executed at the time of entry into the contract.
- Most often, a seller is asked to provide a performance bond to reassure the buyer if the commodity being sold is not delivered.
- The large company decided that they would need a performance bond from us to ensure that they got their payment.
- A performance bond is usually issued by a bank or an insurance company.
- The performance bond essentially functioned as a loan as the exchange of money was implied and guaranteed in the arrangement.
- A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet the obligations of the contract.
- You may receive a performance bond if you get what you want out of a negotiation and the other person doesnt currently have the cash on hand.
Meaning of Performance bond & Performance bond Definition