Performance Guarantee or Performance Bond

Article 2 of ICC publications 325 defines “Performance Guarantee” as an undertaking given by bank (guarantor) at the request of a supplier of goods or services or other contractor (principal) to a buyer or to an employer (the beneficiary) whereby the guarantor undertakes, in the event of default by the principal in due performance of the terms of a contract between the principal and the beneficiary, to make payment to the beneficiary within the limits of a stated sum of money.

The performance bonds are considered as risky as these remain valid for the life of the contract thereby keeping the banks exposed to the risk for payment under their commitment even though the circumstances of the principal may adversely change.

Performance Guarantee or Performance BondInternational TradeGuarantee,Performance Bond,Performance Guarantee?,Shipping Guarantee,Types of GuaranteesPerformance Guarantee or Performance Bond Article 2 of ICC publications 325 defines “Performance Guarantee” as an undertaking given by bank (guarantor) at the request of a supplier of goods or services or other contractor (principal) to a buyer or to an employer (the beneficiary) whereby the guarantor undertakes, in the...Investment analysis basics