A Bond is a Guarantee by the surety (Insurer) to accept responsibility for the performance of a contractual obligation entered into by the person primarily liable under the contract, in the event of that person's default.
A Performance Bond is to ensure that contractors faithfully carry out the terms & conditions of a written contract. The amount of the bond will be recovered by the principal should the contractor fail to perform in accordance with the terms of the contract.
Bond business normally secured together with other project insurances such as Contractor's All Risks or Erection All Risk Insurance, Public Liability Insurance and Workmen's Compensation Insurance. In accordance with PIAM Guidelines, in addition to counter indemnities, the Contractor is also required to provide cash collateral security to the Surety.
Bond involves three parties: