Legal Definitions - operative performance bond

An operative performance bond is a type of bond that ensures a contractor will complete a project according to the terms of their contract. It is a financial guarantee that protects the project owner from financial loss if the contractor fails to meet their obligations.

• When a construction company is hired to build a new office building, they may be required to provide an operative performance bond to the project owner. This bond would ensure that the construction company completes the project on time and according to the agreed-upon specifications.
• In another example, a government agency may require a contractor to provide an operative performance bond when bidding on a public works project. This bond would protect the agency from financial loss if the contractor fails to complete the project as required.

These examples illustrate how an operative performance bond works to protect project owners from financial risk. By requiring a bond, the project owner can have confidence that the contractor will fulfill their obligations and complete the project as agreed.