A performance bond is a type of guarantee provided by a contractor (or supplier) to a project owner (obligee) to ensure the contractor fulfills their obligations under a contract. It acts as a financial safeguard, protecting the project owner from losses if the contractor fails to complete the project as per the agreed terms, specifications, and timeline.

Key Features of a Performance Bond:

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1. Purpose:

   • Ensures the contractor completes the project according to the contract terms.

   • Provides financial protection to the project owner in case of default, poor performance, or abandonment of the project.

2. Amount:

   • Typically ranges from 10% to 25% of the contract value, depending on the project size and requirements.

3. Issuer:

   • Issued by a bank, insurance company, or surety company on behalf of the contractor.

4. Validity Period:

   • Remains valid until the project is completed and all contractual obligations are fulfilled.

5. Claim Conditions:

   • The bond can be claimed if the contractor fails to:

     • Complete the project.

     • Meet the quality standards or specifications.

     • Adhere to the agreed timeline.​