What is a performance bond?

• A. A guarantee by a surety to protect the community association if the contractor fails to perform or finish the work
• B. Insurance for construction materials
• C. A bond that guarantees owner will receive early completion
• D. A license requirement for subcontractors

Answer: (A)

A performance bond is a guarantee by a surety company to protect the owner (such as a community association) if the contractor fails to perform or complete the work as specified in the contract. If the contractor defaults, the surety covers the cost to finish the project or pays for damages up to the bond amount, often by hiring another contractor to complete the work. This transfers the risk of non-performance from the owner to the surety and helps ensure the project is completed in accordance with the contract. It is not insurance for construction materials, it does not guarantee earlier completion, and it is not a license requirement for subcontractors.