What is a Performance Bond?
According to Wikipedia a performance bond, or contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.
Performance Bonds are guarantees to a project owner, that the contractor will complete its job according to the terms and conditions of the contract. The basic function of a performance bond is to provide financial protection to the project owner in the event of default on the part of the contractor.
Performance bonds are generally issued as part of a ‘Performance and Payment Bond’, where a payment bond guarantees that the contractor will pay the labor and material costs they are obliged to.
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