What is a Performance Bond?

A Performance Bond is a guarantee, typically with a value of 10% of the contract price, however in some cases this can vary. It is designed to offer some  protection to the Employer/ Beneficiary against any losses and/or damages sustained as a result of the Contractor failing to perform its contractual obligations.

 How do Performance Bonds Work?

A performance bond is a tripartite agreement and is designed to offer some protection to the beneficiary in cases were the contractor fails to perform the Contract.
The reasons for such failure could be insolvency, default or any other actions as defined in the contract or bond wording.
In the case of a dispute, the first action would be to the Contractor/Sub-Contractor to remedy the issue, if that fails and a call is made on the Bond the Surety will investigate the matter, if the claim is valid the damages would be established and asceratined in accordance with the Contract.

Specimen Performance Bond