Performance bonds are commonly associated with which area of business?

Performance bonds are primarily used in construction contracts, which serve as a guarantee that the contractor will fulfill their obligations as specified in the contract. These bonds protect the project owner from financial loss if the contractor fails to complete the project or meet specific standards. They ensure that subcontractors and suppliers are paid, and that the completion of a project occurs according to the agreed-upon terms.

In the context of leasing agreements, performance bonds are not typically utilized. While leasing agreements can include various forms of security and collateral, they do not commonly require the use of performance bonds like construction contracts do. Therefore, recognizing that performance bonds are fundamentally linked to the assurance of contract completion is key to understanding their prevalence in the construction industry.