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Everything you need to know about performance bonds
A performance bond is also known as a contract bond which is issued by an insurance company. It is issued as surety by the insurance company stating the completion of a certain contract or act. It is basically issued to a party that comes into the contract; it acts as a guarantee against the failure of the contract by the other party.
These bonds are generally provided by financial institutions like banks and insurance companies. The financial institution makes sure that the contractor is completing the work and adhering to the code of conduct of the contract.
How does it work?
Aspects of performance bonds
In a performance bond, the main working contractor is liable for all his activities, from the success of the contract to the failure of the contract.
A performance bond is a security provided to the different contractor coming together into contact to start working together. The financial institution makes sure that none of the contractors face any unfair terms and are equally profited by the business. Furthermore, they need to facilitate a payment in case of failure of the contract, or of the activity mentioned in the contract.
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