What is the difference between a surety bond and a performance bond?

A surety bond and a performance bond are two different types of legal documents in California construction law. A surety bond is a contract between three parties—a principal (the person or entity who will be performing the work), an obligee (the person or entity who requires the bonding, such as the government or a project owner) and a surety (the company providing the financial assurance). The surety bond guarantees that the principal will fulfill their contractual obligations as stated in the agreement. A performance bond, on the other hand, is a type of surety bond that guarantees that the principal will complete the contract in accordance with the contract stipulations. It is a three-party contract between the principal, the obligee, and the surety company. The performance bond serves as a guarantee that the work will be done as agreed upon. It is a form of security for the obligee, protecting them if the principal does not fulfill their contractual obligations. In summary, the primary difference between a surety bond and a performance bond is that the latter is a type of surety bond that guarantees that the principal will complete the contract according to the contract specifications. The surety bond, however, is a contract between three parties guaranteeing that the principal will fulfill their contractual obligations.

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What is the difference between a surety bond and a performance bond?

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