Performance Bond
Enhance the Competitive Advantage of Your Business with Our Performance Bond
A Performance Bond Guarantees that a bonded contractor will perform the obligations under the contract according to the contract terms and conditions. Project owners will typically require performance bonds for either 50% of the contract value or 100% of the contract value. In some rare cases, they may require bonds for less than 50% of the construction value but this will generally occur for service-based contracts.
It is important to remember that a performance bond is not insurance. A Performance bonds is a three-party agreement. The Principal is the party that is fulfilling the contract. This is usually a Contractor. The party that is receiving the benefit of the performance bond is referred to as the Obligee. This is usually the project owner or general contractor. The Surety is the third party that is guaranteeing the Principal’s completion of the project. This is the bond company.
How Do Performance Bonds Work?
A contractor (Principal) pays a bond company (Surety) a premium and agrees to reimburse the bond company for any losses. In return, the bond company provides a guarantee to a Project Owner or another contractor (Obligee) on the contractor’s behalf. If the contractor does not perform, the Obligee can make a claim against the bond.
Talk to one of our experts for a detailed guide: