What does the performance bond protect the obligee from?

A performance bond primarily protects the obligee, typically the project owner or the entity requiring the bond, from potential failures on the part of the contractor, including issues like subcontractor or supplier failures.

When a contractor does not fulfill their obligations as outlined in the contract, such as failing to complete the work or adhering to the project specifications, the performance bond can provide financial compensation to the obligee. This ensures that the project can continue without significant financial loss, allowing the obligee to seek alternative means to complete the project.

The bond acts as a guarantee that the work will be completed, and if the contractor fails to do so, the bonding company can step in to cover the losses associated with that failure, thus protecting the obligee's investment in the project.