Performance Bonds
Propeller Bonds makes it easier and faster to obtain a performance bond. A common form of contract bond, performance bonds offer a layer of protection from a party’s failure to meet contractual obligations. Propeller aims to confidently accelerate your business, providing access to the industry's best surety markets and technology. Propeller Bonds features more than 7,000 surety bonds, including Contract, Commercial, and Fidelity bonds. The platform offers a white-label solution to agencies, enabling them to buy bonds on behalf of their clients or granting clients the ability to purchase bonds independently. Agents receive compensation for every purchase made through their personalized site link. Propeller collaborates with reputable carriers that hold an esteemed "A" rating.
Get Appointed Today!
What is a Performance Bond?
A performance bond serves as a promise that the party will see the project through from start to finish. The performance bond definition is a guarantee that a business or individual completes the project they’ve agreed to do in accordance with any specifications in the contract. While the obligee can be a city, local government, or private developer, performance bonds are issued to ensure project fulfillment by a general contractor.
Most common in construction and real estate development, performance bonds offer security that a general contractor is financially and professionally capable of finishing the specific project on behalf of the business or entity that issued the bond. Performance bonds offer peace of mind to project owners by providing a legally binding agreement that they will be compensated for any losses or damages in the event of non-performance or default by the contractor.
How does a Performance Bond work?
A performance bond operates as a contractual agreement that involves the project owner (obligee), the contractor (principal), and the surety company. To carry out a construction project, the project owner will require the general contractor to obtain a performance bond before starting any work on the project. Contractors must then submit an application for a performance bond to the surety company and are accepted based on the contractor’s experience, credentials, and project size.
If the contractor fails to adhere to the terms of the agreement with the project owner, such as producing incomplete work, inadequate quality, or abandoning the project entirely, the project owner has sufficient grounds to submit a claim to the surety company against the performance bond.
In addition to supplying the performance bond, the surety company is responsible for assessing the validity of a claim, compensating the project owner, and ensuring that the contractor’s obligation is sufficiently fulfilled. Performance bonds act as a buffer for providing financial security and instilling trust between the project owner and general contractor throughout the construction build.
Interested in Learning More?
Importance of having Performance Bonds
Although performance bonds play a crucial role in various industries, they are particularly important in construction and real estate development as they provide assurance and protection against failed performance and other risks the contractor presents.
With the requirement of a performance bond, project owners can implement additional safety measures that effectively reduce potential financial and operational instabilities. Performance bonds encourage greater accountability and dependency in the industry by holding parties responsible for delivering on their contractual obligations. Performance bonds help streamline the approach to a project by enhancing its overall efficiency and effectiveness, ultimately benefiting all parties involved.
