performance bond

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Performance bond

A surety bond between two parties, insuring one party against loss if the terms of a contract are not fulfilled. Usually part of a construction contract or supply agreement.

Performance Bond

A bond that a company issues to another guaranteeing repayment in case some project fails. For example, suppose a company hires a construction firm to build an apartment building. The construction firm may issue a performance bond to the company. If the apartment building is not constructed according to specifications, the company will not incur any losses because the construction company must repay the bond. This reduces the risk to the bondholder that another party to a contract will not fulfill its obligations.

performance bond

An insurance policy often required on government construction projects.If the contractor does not perform the work it contracted to do, the insurance company will either hire someone else to complete the job or will pay off the resulting damages, up to policy limits. Sometimes it is inaccurately called a performance and completion bond. Technically, liability under a performance bond is contingent on the contracting party paying according to the terms of its construction contract.Contrast with completion bond,where the contracting party does not have to pay anything to the insurance company,even though it might have been obligated to pay the contractor. As a result, most bonds are performance bonds and it is very difficult to obtain a completion bond.

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When it comes to requiring surety bonds for financing, contract bonds for payment and performance are about 90 percent of what is involved, Inscho says.
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Today ORSC's bond threshold for contract bonds is $50 million.
4 billion in contract bonds that allowed it to bid for new business.
The scheme was launched by UK Export Finance (UKEF) to help exporters raise contract bonds such as advance payment guarantees (APGs) and performance bonds.
These increases were primarily due to the continued volume growth of small commercial products along with improving rates on large commercial and contract bonds.
Paribas analyst Mr Darren Shaw said the announcement left unresolved the crucial issue of contract bonds issued by the construction side of Tarmac's operations and guaranteed by Tarmac plc.
The 'AA-' rating is based on the credit quality of the state of New York (GO bonds rated 'AA' with a Stable Outlook by Fitch), as the service contract bonds are secured by annual legislative appropriations from the general fund, pursuant to a service contract.
The Bond Support Scheme provides exporters with additional support when raising contract bonds related to exports and is part of a range of UK Export Finance s initiatives.
The company principally provided surety bonds, contract bonds, license and permits bonds, and commercial surety bonds.
In addition, Fitch affirms the 'AA-' rating on outstanding ESDC service contract bonds.
the corporation), has also recently issued service contract bonds for its Correctional Facilities and Youth Facilities programs, and the state has used the device for other agencies.