Performance Bonds are a written guarantee from a third party guarantor. Typically they are issued by a bank or an insurance company. It is submitted to a client by a contractor or undertaker to commit that whatever he has promised will be delivered within the specified time of that contract. It will note that if he fails to deliver, the shortfall or the entire sum committed will be covered by the issuer of the Performance Bond. A performance bond ensures payment of a sum, not to exceed the stated maximum amount, of money in case the contractor fails to perform according to contract.