performance bond:
(1918)

1. A bond given by a surety to ensure the timely performance of a contract.  *  In major international agreements, performance bonds are typically issued by banks, but sometimes also by insurance companies.  The face amount of the bond is typically 2% of the value of performance, but occasionally as much as 5%.

2. A third party’s agreement to guarantee the completion of a construction contract upon the default of the general contractor. — aka completion bond; surety bond; contract bond.  Cf. common-law bond under BOND (2). [1]

1. A type of contractors’ bond; a bond which guarantees that the contractor will perform the contract, and usually provides that if the contractor defaults and fails to complete the contract, the surety can itself complete the contract or pay damages up to the limit of the bond.  17 Am J2d Cont Bond § 1. [2]

1. A surety bond which guarantees that the contractor will perform the contract; it usually provides that in the event of default the surety must either complete the contract or pay liquidated damages or a penalty in the amount of the bond.
     See indemnity bond; penal bond. [3]

Types of Surety Bonds: