- bond that calls for specific monetary payment to a beneficiary if the purchaser or maker fails to do something or acts in violation of a contract. It may be a surety bond purchased from an insurance company, or cash held in an escrow account by a bank or a third party.
- standby letter of credit issued by a bank that guarantees the issuing bank will pay a third party beneficiary in the event the bank's customer fails to meet a contractual obligation.
contractor's bond, guaranteeing that the contractor will perform the contract and providing that, in the event of a default, the surety bond may complete the contract or pay damages up to the bond limit.
surety bond given by one party to another, protecting the second party against loss in the event the terms of a contract are not fulfilled. The surety company is primarily liable with the principal (the contractor) for nonperformance. For example, a homeowner having a new kitchen put in may request a performance bond from the home improvement contractor so that the homeowner would receive cash compensation if the kitchen was not done satisfactorily within the agreed upon time.
bond guaranteeing that a contractor will perform under the contract in accordance with all specifications of the bid submitted.
one issued by an insurance company; posted
Example: The contract requires the contractor to put up a $100,000 performance bond. If the contractor fails to do the job, the property owner has assurances of compensatory payment from the insurance company.
