Contract Bond A contract bond guarantees the terms of a contract are fulfilled. It can also be referred to as a contractor license bond, construction surety bond, bond for construction or performance bond. A contract bond is ideal for large-scale projects and guarantees the project will be completed per the contract’s specifications. If the contracted party fails to fulfill its duties according to the agreed upon terms, the contract owner can claim against the bond to recover financial losses or a stated default provision. All contract bonds guarantee the performance and/or payment of the obligations under contract.