For example, a contractor may cause a performance bond to be issued in favor of a client for whom the contractor is constructing a building. If the contractor fails to construct the building according to the specifications laid out by the contract (most often due to the bankruptcy of the contractor), the client is guaranteed compensation for any monetary loss up to the amount of the performance bond.

Performance bonds are commonly used in the development of real property, where an owner or investor may require the developer to assure that contractors or project managers procure such bonds in order to guarantee that the value of the work will not be lost in the case of an unfortunate event (such as insolvency of the contractor). In other cases a Performance bond may be requested to be issued in other large contracts besides civil construction projects.

The term is also used to denote a collateral deposit intended to secure a Futures contract, commonly known as margin.

Performance bonds have been around since 2,750 BC and, more recently, the Romans developed laws of surety around 150 AD, the principles of which still exist

Stay tuned as we roll out our new surety bond marketplace.

If you are an agent or a carrier specializing in surety bonds, call us at 310.246.5199 and ask us how you can be part of this project.