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A performance bond is normally issued to guarantee the timely and satisfactory completion of a job by a contractor.
A contractor may be asked to provide a performance bond by their client to protect them in the event of the work not being completed as agreed for whatever reason. A Performance Bond can only be taken out by a contractor, even though it is usually their client who has requested the bond.
A performance bond provides a client (most often a building owner or investor) with a guarantee that should a contractor (typically a builder they have appointed to do a job) be unable to complete the work they have agreed to do in the time stated, the policy will pay out an agreed amount.
Performance bonds are nothing new – in fact they were used by the Romans when they developed the laws of surety almost 2000 years ago. They protect the funder of a major project against losses incurred by unforeseen problems with their contractors.