What is a performance bond?

A performance bond serves as a guarantee that a contractor will complete the work as specified in the contract. This type of bond ensures that if the contractor fails to fulfill their contractual obligations, the bond can be claimed to cover any financial losses incurred by the project owner due to the contractor's inability to complete the work. The bond provides peace of mind to the project owner, knowing that there is a financial safety net in place that will protect them from potential losses should the contractor not meet their commitments.

While the other options touch upon important aspects of contractual relationships and responsibilities, they do not accurately define the specific purpose of a performance bond. The distinction lies in its primary function to ensure project completion, rather than payment to subcontractors, material guarantees, or broader legal obligations.