Understanding a Performance Bond
In this day and age, there are many different types of bonds: surety bonds, fidelity bonds, bail bonds, performance bonds … only to name several. In fact, you may be very confused about the different types of bonds that are available today. Through this article, you will be provided with a practical overview of a performance bond.
In general and most basic terms a performance bond is rather like a policy of insurance designed to provided “coverage” in the event that a certain act is not performed and performed properly. On many levels, the performance bond itself can be best understood by way of an illustrative example.
Let us assume for the moment that you are the owner of a small business and you have decided to hire a consultancy to create and put on an intense training program for your staff or employees. To this end, you are obliged to spend a good amount of money -- not only for the services of the consultants but to rent meeting space and make other preparations for this in depth training program.
Let us further assume that after you have expended literally thousands of dollars paying for this intense training program the consultants do not show up … there ends up being no training program at all. You end up having spent a good deal of money -- most of which you cannot get refunded. In short, you are left holding a very heavy and very expensive bag.
Of course, you would have the ability to chase after these scoundrels in a court of law. Certainly, you could file a lawsuit and attempt to get back the money you’ve spent. Unfortunately, in so many, many instances the well worn phrase “blood from a turnip” pops readily into mind.
In the alternative, as you were going about planning this important employee training program, you could have obtained a performance bond. In other words, you could have obtained protection through a performance bond that would have provided you compensation to cover your expenses should the promises “performance” (here, the in depth training program presented by these specialists) not occur as agreed upon and planned.
The performance bond is also common in the area of construction and other arenas in which another person or entity is being called upon to perform certain tasks or undertakings within a predetermined period of time.
