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Simple English definitions for legal terms
revolving performance bond
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A quick definition of revolving performance bond:
A revolving performance bond is a type of bond that ensures the timely completion of a contract. It is in continuous effect for the duration of the contract, usually with an additional number of days. This type of bond is often used in major international agreements and is typically issued by banks or insurance companies. If the contractor fails to complete the contract, the bond guarantees that a third party will step in and complete the work.
A more thorough explanation:
A revolving performance bond is a type of performance bond that remains in effect for the entire duration of a contract, usually with an additional number of days (often 45) after the contract ends. It is a guarantee given by a surety to ensure the timely completion of a contract.
For example, a construction company may be required to provide a revolving performance bond to guarantee the completion of a project. The bond remains in effect until the project is completed and accepted by the client, plus an additional number of days to ensure any final issues are resolved.
Revolving performance bonds are often used in major international agreements and can be issued by banks or insurance companies. The face amount of the bond is typically 2% of the value of performance, but can be as much as 5%.