Bond to Secure the Performance of a Contract

What is Bond to Secure the Performance of a Contract?

A performance bond, also known as a contract bond, is a written guaranty issued by a third party (usually insurance company or a bank) to ensure a satisfactory completion of a project by a contractor. A job requiring a payment and performance bond will usually require a bid bond, to bid the job. It binds the contractor for rendering appropriate services.

Why is Bond to Secure the Performance of a Contract required?

A performance bond is issued by one party to contract to the other party as a guarantee against the issuing party's failure to meet their obligations under the contract, or to delivery on the level of performance specified in the agreement. Performance bonds are typically provided by a financial institution such as a bank or an insurance company. The bond would be paid for by the party providing the services under the agreement.

What should a Bond to Secure the Performance of a Contract cover?

A performance bond must contain the details of the individual entering into the same. It should also contain the details of the contract of the agreement in pursuance to which the bond is being entered into between the parties. Additionally, it should specify the obligation to perform the contract and must also contain the conditions under which the performance of the contract will not be binding upon the parties.

Format for Bond to Secure the Performance of a Contract

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DRAFT OF BOND TO SECURE THE PERFORMANCE OF A CONTRACT





By this Bond I Mr. A residing at ………………..... the Obligor acknowledge to be bound to pay to Mr. B the Obligee the sum of Rs... on demand by the said Obligee.

WHEREAS by a Contract entered into between the Obligee and the Obligor, the Obligee has appointed the Obligor as a contractor to construct a building on the plot of land of Obligee situated at ... in terms of the said contract.

AND WHEREAS as the said contract provides that the Obligor will execute a bond in the sum of Rs... for the proper performance of the said contract.

NOW The Condition of this Bond is that If the Obligor contractor or his legal representatives or permitted assigns shall and will and truly, perform and fulfill and keep all and every covenant, clause, provision, term or condition in the said contract and on the part of the Obligor (Contractor) to be observed and performed according to the true purport and intent or meaning thereof, then this Bond shall be treated as void but otherwise it shall remain in full force and effect.



In Witness Whereof the Obligor has put his hand this ... day of ………….., 20__.

Signed and delivered by the

with in named Mr.………….

WITNESSES;

1.

2.

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Documents Required for Bond to Secure the Performance of a Contract

No specific documents are required to execute or make a performance bond. However, to validate the agreement, one must scrutinize the identity proofs of both parties in order of verifying the names and addresses of the parties. One must also verify that the agreement contains all the necessary clauses as required.

Procedure for Bond to Secure the Performance of a Contract

There is no specific procedure applicable to the execution of the performance bond. However, it is always recommended to consult a lawyer before drafting a performance bond with all the necessary details as stated above. Once the bond is drafted it should be thoroughly analyzed by the executor and should be executed as per the guidance received from the lawyer. The rules related to registration of the bond must also be followed while executing, as may be applicable as per the prevalent laws.

Legal Considerations for Bond to Secure the Performance of a Contract

A person executing a performance bond must make sure that both parties have the legal authority to enter into the agreement. Both the parties executing the bond must be of legal age to sign the bond and must do so without coercion or any undue influence. The parties signing the bond must be sane at the time of execution and should do so in the presence of witnesses.

How can a lawyer help to draft Bond to Secure the Performance of a Contract?

While drafting bonds, it is important to know as to what terminology should be used while drafting the same as a small ambiguity in the terms can also jeopardize the claim of the parties. This is why it is crucial to have a documentation lawyer to assist you with the drafting of the bond. Being an expert in the area of documentation law, a documentation lawyer knows the nitty-gritty of the legal procedures and the requirements involved in drafting a bond. With the experience attained in the field, he/she can guide you with the right advice while entering into a bond and can make sure that such mistakes are eliminated that cannot be resolved even through further legal procedures.

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