Performance Bond

AAA

DEFINITION of 'Performance Bond'

A bond issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract.

INVESTOPEDIA EXPLAINS 'Performance Bond'

For example, a contractor may issue a bond to a client for whom a building is being constructed. If the contractor fails to construct the building according to the specifications laid out by the contract, the client is guaranteed compensation for any monetary loss.

RELATED TERMS
  1. Construction Bond

    A type of surety bond used by investors in construction projects ...
  2. Banker's Acceptance - BA

    A short-term debt instrument issued by a firm that is guaranteed ...
  3. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities ...
  4. Guaranteed Investment Contract ...

    Insurance contracts that guarantee the owner principal repayment ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Bid Bond

    A debt secured by a bidder for a construction job or similar ...
Related Articles
  1. Profit On Your Home's Price - Even If ...
    Options & Futures

    Profit On Your Home's Price - Even If ...

  2. How Does Your Margin Grow?
    Options & Futures

    How Does Your Margin Grow?

  3. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

  4. 3 ETF Signals You May Use For Confirmation
    Economics

    3 ETF Signals You May Use For Confirmation

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center