Insurance & LiensQuestion 1501 of 1605
A 'performance bond' on a construction project primarily guarantees to the obligee that:
a.Subcontractors and suppliers will be paid
b.The owner's financing will be approved
c.The contractor carries workers' compensation
d.The contractor will complete the project according to the contract terms
Explanation
A performance bond guarantees the contractor will complete the work per the contract; if the contractor defaults, the surety arranges completion or pays damages up to the bond. Payment to subs/suppliers is the job of the separate payment bond.
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Related questions on this topic
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)