Features

• Performance bonds are issued to protect the interests of the client. The client can legally sue the contractor in case the work is not completed as per his specifications. The contractor is obliged to pay the client the sum of the contract plus the damages.
  
  

Function

• Performance bonds are significantly used in the real estate and construction industries. Banks stand as a third-party guarantee to these bonds. The banks evaluate the contract and fix a mutually agreeable bond rate. The contractor pays a premium until the time of completion of the contract. At the completion of the contract, the premium is refunded to the contractor.
  
  

Benefits

• Performance bonds benefit the client as well as the contractor. The client's money is insured, and hence he does not have too much to lose. Only contractors who have a certain financial standing in the market are allowed by banks to take on performance bond agreements. Therefore, these contractors have bargaining power in deciding the components of the contract.