Advance Payment and Performance Bond
Advance Payment Bond guarantees the amount advanced to a contractor in the event of failure to complete the contracted project.
It is issued only to cover the advance payment given to a contractor as against the full contract value. Most contract agreements require that mobilization or advance payment for certain percentage of the full contract value be given to the contractor and upon satisfactory completion, the balance amount is paid.
Performance Bond is a policy designed to provide financial compensation to the principal party to a contract for all claims and liabilities to the tune of the total contract amount as a result of failure or non-performance or improper performance of the contract. Under this policy the insurance company being the surety of the of the contractor in this context, undertakes to pay to the contractor upon first demand any such amount as the contractor shall require, not exceeding the full contract value