Performance Bonds are commonly required in:

• Construction and civil engineering contracts
• Public sector and government-funded projects
• High-value or long-duration works
• Projects where contractor insolvency would present a material risk

They are typically requested by:

• Employers or developers
• Housing associations
• Local authorities
• Tier-1 contractors managing subcontractor risk

If you are unsure whether a Performance Bond is contractually required or commercially appropriate, we will advise you openly, including where a different bond type may be more suitable.

Contract agreed
The employer and contractor enter into a contract.

Bond requirement triggered
If the employer requires a Performance Bond, it would usually be for around 10% of the contract value.

Bond issued by a surety
A surety guarantees the contractor’s performance under the contract.

Contractor defaults (if applicable)
If the contractor fails to perform, the employer may make a claim.

Surety responds under Bond terms
Depending on the wording, the surety may compensate the employer or contribute to completion costs.

This structure provides financial protection while allowing contractors to trade without tying up cash.

There are different types of performance bonds, and knowing the difference between them is essential. The key difference between conditional and unconditional/on-demand performance bonds lies in the conditions for activation and the beneficiary’s claim requirements.

Conditional Bonds

Conditional Bonds are a type of surety bond that is contingent on specific conditions or requirements being met before the performance bond becomes effective or enforceable.

Conditions for Activation: The conditions for the contract Performance Bond’s activation are usually detailed in the bond agreement/wording. They may include the following scenarios:

• The contractor’s failure to complete the project within the agreed-upon timeframe.
• Failure to meet specific quality or performance standards outlined in the contract.
• The contractor’s financial default or inability to pay subcontractors and suppliers.
• Other specific conditions that are stipulated in the contract.

Common Forms of Conditional Bond:

JCT Performance Bonds: A JCT performance bond is a bond that is detailed and recommended within a Joint Contracts Tribunal (JCT) contract.

ABI Performance Bonds: The Association of British Insurers (ABI) provides specific and standardised template wording for performance bonds. An ABI performance bond is a conditional bond that uses this standard wording.

On-Demand/Unconditional Bonds

An On-Demand Performance Bond, also known as an Unconditional Bond or demand guarantee, is a type of Surety Bond that provides a guarantee of performance by a contractor or principal. They do not require the beneficiary (typically the project owner or client) to prove a breach of contract or fulfil specific conditions to trigger the Performance Bond. In essence, it is a more straightforward and immediate form of financial protection for the beneficiary.

With on-demand performance bonds, the beneficiary can make a claim and receive payment from the bonding company immediately upon presenting a demand for payment. The beneficiary does not need to show evidence of non-performance or contractual violation.

If you require a Performance Bond with specific wording, speak to a client account manager today who can assist with your requirement.

Many projects require multiple bonds, which must align contractually. We ensure wording consistency across all bond types.

Enjoy the benefits of working with a broker that dedicates itself solely to the business of Surety Bonds and Performance Bonds for the construction sector. Our knowledge of securing low-cost construction Performance Bonds is unparalleled in the industry.

This is perhaps best reflected in our referrer relationship scheme, where other operators in the construction industry will refer their clients over to us so that they can benefit from our expertise.

Gain immediate access to our wide-ranging and exclusive underwriting panel. Our proficiency in this area means we can guarantee to beat any quote you will receive elsewhere.

Already got a quote? Get in touch & we’ll beat it.

Place your trust in CG Bonds and receive advice from the most knowledgeable surety bond experts.

Other reasons to work with CG Bonds include:

• Surety bonds are our sole focus
• Dedicated account manager from enquiry to issuance
• Direct access to specialist underwriters
• FCA regulated broker (No. 814847)
• Transparent £195 admin fee

Access our easy-to-fill-out online bond application form here.

Place your trust in CG Bonds and receive advice from the most knowledgeable surety bond experts.

Other reasons to work with CG Bonds include:

✔ FCA Regulated Broker. CG Bonds Surety are authorised and regulated by the Financial Conduct Authority (FCA) no.814847.

✔ We make applying very easy. We’ve designed a new streamlined bond application form that’s easy to fill in and will help you to complete it. Utilise our over-the-phone application completion service today.

✔ A dedicated client account manager throughout the entire process, offering unparalleled technical advice and support.

✔ Unmatched expertise. Our company was founded and still is run solely by dedicated surety bond experts. Contact us now to speak with an expert.

✔ We can consult and liaise with beneficiaries and contractors on your behalf, to confirm and advise on the appropriate bond wording and type of bond required.