Transferable Performance Bonds

Written by Michael O'Brien
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What are transferable performance bonds? Do understand this, we must first look at what performance bonds are. Basically, when a company is called upon to perform a task, there are certain guidelines, regulations, and contractual agreements that must be adhered to. Failure to meet these requirements, thereby costing the obligee (the one paying for the service) time and money must be resolved.

Performance bonds, as the name implies, have to do with the need of companies to perform the duties and practices they are obliged to follow. Failure to do so must be paid for by that company, or the surety agency which bonded them must step in to absorb such expenses.

Where Transferable Performance Bonds Come in

Basically, the concept of transferable performance bonds has to do with the transference of responsibility for the company that has been issued a bond to all other parties involved in a particular project as well. For example, let's say a construction firm hires a separate company to lay the concrete on a building project. If that concrete company makes a mistake or fails to adhere to some kind of legal or contractual obligations, it could cost the person paying for the project quite a bit.

Transferable performance bonds ensure that all parties be responsible for their actions on such an undertaking. If they are not, the surety company issuing the bond pays for such expenses. Even if the party responsible for the mishap was not officially bonded by a particular surety, transferable performance bonds mean that such responsibility is still transferred to either the company which is bonded and employing that outside agency, or the surety company itself.

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