A performance bond is typically written for what percentage of the contract amount?
Correct Answer
B) 100%
Performance bonds are typically written for 100% of the contract amount to ensure complete coverage for the owner in case the contractor defaults and the work must be completed by another contractor.
Why This Is the Correct Answer
Performance bonds are written for 100% of the contract amount because they must provide complete financial protection to the project owner. If a contractor defaults, the surety company needs sufficient funds to hire a replacement contractor to complete all remaining work. The bond amount must cover the full contract value to ensure the owner can finish the project without financial loss, as completion costs may equal or exceed the original contract amount.
Why the Other Options Are Wrong
Option C: 75%
50% coverage would be insufficient because if a contractor defaults midway through a project, the remaining work could cost significantly more than half the original contract amount due to mobilization costs, schedule delays, and premium pricing for emergency completion.
Option D: 50%
125% would be excessive for a standard performance bond, though some specialty projects may require higher coverage. Standard industry practice and most contract specifications call for 100% coverage as adequate protection.
Memory Technique
Think 'PERFECT Performance = 100%' - a performance bond must provide perfect (complete) coverage of the contract amount
Reference Hint
Look up 'Construction Bonds' or 'Surety Bonds' chapter in your Florida construction law reference materials, specifically the section on performance bond requirements
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