performance bond definition

performance bond

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. 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. These 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.

performance bond is in the Agreements & Contracts, Banking, Commerce & Finance and Purchasing & Procurement subjects.

performance bond appears in the definitions of the following terms: contract performance bond, demand guarantee, bid bond, continuous bond, retention bond, standby letter of credit (L/C), labor and material payment bond, performance standby, contract bond, bond and

performance bond appears in the other term:

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