What is a Performance Bond?
A performance bond is a document underwritten by an insurer which guarantees to pay up to a maximum amount set out in the bond, usually 10% of the building contract sum, in circumstances where the contractor becomes insolvent or otherwise breaches the terms of the building contract.
A performance bond is to be distinguished from an 'on demand' bond which is a bond covering a demand by the beneficiary up to a maximum amount and where the bondsman is liable to meet that demand and pay out. A performance bond is a guarantee of performance and will only pay out where performance is a proven issue.
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