Legal Definitions - up-front performance bond

An up-front performance bond is a type of bond that is given before a buyer's letter of credit or other financing is issued. It is a guarantee that the contractor will complete the work on time. In major international agreements, banks or insurance companies issue performance bonds. The bond's face amount is usually 2% of the value of performance, but sometimes it can be as much as 5%. There are different types of performance bonds, including nonoperative, operative, and revolving performance bonds.