Contract Glossary
Performance Bond
Definition
A guarantee, typically issued by a surety company or bank, that a contractor will complete a project according to the contract terms. If the contractor defaults, the bond pays for completion. Common in construction and government contracts.
In Practice
If you're awarding a $2 million construction contract, a performance bond (usually 10-100% of the contract value) protects you if the contractor walks away, goes bankrupt, or does substandard work. The surety either finds a new contractor or pays the bond amount. Government contracts over $150,000 in the U.S. require performance bonds under the Miller Act.
Common in these contract types
Related terms
Related contract clauses
Frequently asked questions
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