What is a "performance bond"?

A performance bond is a surety bond that guarantees the project owner that the contractor will complete the project according to the terms and conditions specified in the contract. This bond provides a level of assurance that the contractor will fulfill their obligations, which includes adhering to the project timeline and quality standards set forth in the agreement. If the contractor fails to complete the project or does not meet the contractual requirements, the bond can be used to cover the costs associated with finding another contractor to complete the work, thereby protecting the interests of the project owner.

This form of bonding is crucial in construction because it helps mitigate risks for the project owner and promotes accountability among contractors. It ensures that there is a financial safety net in place, should unforeseen circumstances arise that prevent project completion.