Simple English definitions for legal terms
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A nonoperative performance bond is a type of bond that is not currently in effect but will be activated upon the issuance of the buyer's letter of credit or other approved financing. It is a guarantee that the contract will be completed on time and to the satisfaction of the buyer. This type of bond is often used in major international agreements and is typically issued by banks or insurance companies. The face amount of the bond is usually 2% of the value of performance, but can be as much as 5%.
A nonoperative performance bond is a type of performance bond that is not currently in effect but is activated upon the issuance of the buyer's letter of credit or other approved financing. This type of bond is commonly used in major international agreements and construction contracts to ensure the timely completion of a project.
These examples illustrate the definition of a performance bond. In the first example, a performance bond is given by a surety to ensure the timely performance of a contract. In the second example, a completion bond is used to guarantee the completion of a construction contract in case the general contractor defaults. Both examples show how performance bonds are used to ensure the completion of a project and protect the parties involved.