What is a performance bond?

A performance bond is a form of surety bond in Contract Law used to protect a property owner from potential losses if a contractor fails to fulfill the terms of a construction contract in South Carolina. The performance bond is put in place to guarantee that the contractor will perform the job according to the specified terms and conditions. It is a form of financial assurance that the contractor will complete the construction project as agreed upon. The bond is typically issued by an insurance company, bonding company, or bank and is backed by a financial institution with the ability to cover the cost of the project should the contractor fail to finish it. The bond amount is typically based on the estimated cost of the project plus any associated fees. The party requesting the bond (owner or lender) is usually the beneficiary, and the contractor is the principal. The performance bond is in place to serve as a safeguard should the contractor fail to complete the project, ensuring that the project will be finished according to the terms of the contract and that the owner will not suffer financial loss.

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