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

A surety bond and a performance bond are two different types of bonds used in West Virginia construction law. A surety bond is an agreement between three parties: the owner (obligee), the contractor (principal), and the surety. The surety provides the contractor with a guarantee to the owner that the contractor will properly fulfill his or her obligations as outlined in the contract. If the contractor fails to fulfill these obligations, the owner can be compensated by the surety up to the amount of the bond. A performance bond is an obligation made by the contractor to the owner that ensures that all work will be complete as prescribed by the contract. A performance bond typically covers the cost of replacing, repairing, or completing any unfinished work in the event the contractor defaults on the contract. This bond also protects the owner from any costs associated with a contractor’s insolvency. In summary, a surety bond is an agreement between the owner, contractor, and surety that guarantees the contractor will fulfill her/his obligations. A performance bond is an obligation that the contractor makes to the owner to guarantee that the work is completed as prescribed in the contract.

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

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