PERFORMANCE BOND Meaning and
Definition
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A performance bond is a type of surety bond issued by an insurance company or a bank to guarantee the completion of a project or contract according to the agreed-upon terms and conditions. It is a legal agreement between three parties: the principal (contractor or project owner), the obligee (client or project owner), and the surety (insurance company or bank).
The purpose of a performance bond is to ensure that the contractor fulfills their contractual obligations and completes the project as specified. This bond provides financial protection to the client in case the contractor fails to deliver the project on time, within budget, or according to the established quality standards.
In the event of a contractor's failure to meet the project requirements, the client can make a claim against the performance bond. If the claim is proven valid, the surety will compensate the client for any financial losses incurred due to the contractor's non-performance or incomplete work. The surety may then seek reimbursement from the contractor for the amount paid.
Performance bonds are commonly used in construction and other industries where significant projects are undertaken. They provide a form of guarantee that assures the client that the contractor will fulfill their obligations. This bond ultimately promotes confidence in the contractor's abilities and helps protect the client's investment.
Common Misspellings for PERFORMANCE BOND
- oerformance bond
- lerformance bond
- -erformance bond
- 0erformance bond
- pwrformance bond
- psrformance bond
- pdrformance bond
- prrformance bond
- p4rformance bond
- p3rformance bond
- peeformance bond
- pedformance bond
- pefformance bond
- petformance bond
- pe5formance bond
- pe4formance bond
- perdormance bond
- percormance bond
- pervormance bond
Etymology of PERFORMANCE BOND
The word "performance bond" is a compound term consisting of two parts: "performance" and "bond".
The term "performance" can be traced back to the Latin word "praestāre", which means "to show, exhibit, accomplish". Over time, it evolved into the Old French term "parfournir", meaning "to complete, accomplish". Eventually, it entered Middle English as "performen", referring to the act of carrying out a task or fulfilling an obligation.
The word "bond" originated from the Old English word "bond", which means "binding". It is derived from the Old Norse word "böndi", which refers to someone who is bound by an agreement or as a guarantee.
When combined, the term "performance bond" refers to a legally binding agreement designed to ensure that a party fulfills their obligations, completes a task, or performs as promised.
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