In real estate and construction, a performance bond is a bond provided by a builder or contractor to guarantee the completion of a construction project. It serves as financial assurance that the work will be performed in accordance with the contract terms.
If the builder fails to complete the project or defaults on the agreement, the performance bond protects the property owner or developer by providing funds or securing a replacement contractor. This type of bond is commonly required in larger construction projects to reduce the risk of nonperformance.
