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. Why should I keep records on my tax-exempt ...
    Taxes

    Why should I keep records on my tax-exempt ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center