A on demand performance bond is a type of surety bond that is typically required by the Obligee (the party who is requiring the bond) in order to protect itself against financial loss if the Principal (the party who will be performing the contractual obligation) fails to perform its obligations under the contract. The surety company that issues the bond is essentially guaranteeing that the Principal will fulfill its obligations. If the Principal does not fulfill its obligations, the Obligee can make a claim on the bond and the surety company will be required to pay out up to the full amount of the bond.
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Use our legal assistantWhen using a On demand performance bond, the claimant must show that the contractor has breached the terms of the contract in order for the claim to be successful. The claimant must also show that they have suffered financial loss as a result of the contractor's breach. The purpose of the performance bond is to provide financial compensation to the claimant in the event that the contractor fails to perform as required by the contract.