What type of bond ensures that a contractor will complete their project according to the terms of the contract?

A performance bond is specifically designed to ensure that a contractor will fulfill their obligations as outlined in a construction contract. This type of bond provides financial assurance to the project owner that if the contractor fails to complete the project, the bond will cover the costs to complete the work or compensate for any losses incurred due to non-performance.

The performance bond essentially serves as a safeguard for the client, guaranteeing that the project will not only be completed but will also meet the specified standards and timelines set forth in the contract. This protection is crucial in the construction industry, where project delays or substandard work can lead to significant financial losses.

In contrast, a bid bond primarily protects the project owner by ensuring that a contractor who wins the bid will enter into a contract, while a fidelity bond covers losses due to employee dishonesty. A lien bond is related to protecting the interests of contractors and suppliers who may be owed payment, allowing the property owner to clear a lien placed on their property. However, it does not ensure project completion. Thus, the performance bond is the appropriate choice for assuring contract compliance in project execution.