What Is a Performance Bond?

The performance guarantee is to prevent the contractor from violating the contract provisions or breach of contract in the process of contract execution, and to make up for the economic loss caused to the contractor. There are three forms of performance guarantee (also called performance guarantee), performance bank guarantee and performance guarantee. The performance bond can be a performance bond, confirmed check, bank draft or cash check. The performance bond generally does not exceed 10% of the contract price.

Performance bond

business contract

1. (Commercial contract)

Laws and regulations do not specify who the performance bond is delivered to. On the surface, the performance bond is closely related to the performance of the contract and it seems that it should be collected by the purchaser, but this is one-sided. Government procurement has a public policy function.

The performance bond collection standard should follow several principles:

First, the amount of performance bond must wait for the contract

First, it is more adapted to the characteristics of the construction industry market.

First, the qualification review of the bidding unit should be strictly conducted to ensure the authenticity and legality of the subject qualification of the bidding unit. This is fulfillment

Many purchasing agencies are

Performance bond: You must first give your bank money, and apply for a performance bond to your bank according to the buyer's (generally the buyer's) performance bond form. The bank will carefully and rigorously review your proposed forms and terms and conditions. Agree (the bank will modify it to minimize its own risks and responsibilities. At this time, you must repeatedly seek the buyer's opinions and discuss the terms with the buyer to modify the terms). Then issue a performance guarantee letter in the name of the bank and promise to use the name of the bank. Provide a 10% funding guarantee. During the validity of the guarantee, if the seller has a breach of contract stipulated in the guarantee, the buyer can take the 10% of the money directly from the bank!
Performance bond: It is relatively simple. Paying the money directly to the buyer or the transaction center you mentioned above is a cash guarantee for the performance of the contract.
Comparison: Although the performance bond is cumbersome, there is a clear validity period in the bond according to the terms of the contract or the agreement between the two parties (and even the requirements of the bank). On this day, your money will automatically be free from the bank. . Of course, the premise is that you have no other handles (such as warranty money) in the buyer's hands. The performance bond is not the case. At the appointed time, you have to ask the buyer for it.

If the bidding documents require the successful bidder to submit a performance bond or other form of performance guarantee, if the successful bidder refuses to submit, it shall be deemed to have given up the winning project. At this time, the bid inviting party may choose other successful candidates as the successful bidder. The original bidder's bid deposit is not refundable, and if the loss caused to the bidder exceeds the amount of the bid deposit, the original bidder shall also compensate for the excess. Article 48 of the "Interim Provisions on the Bid Evaluation Committee and Bid Evaluation Method" stipulates that if the bidding document stipulates that the first-ranking successful candidate should submit a performance bond but fails to submit it within the prescribed period, the bidder may determine the second-ranking successful bidder. The candidate is the successful bidder. Article 62 of the Measures for Tendering and Bidding of Construction Projects stipulates that: "If the bidding documents require the successful bidder to submit a performance bond or other form of performance guarantee, the successful bidder shall submit it; if it refuses to submit it, it shall be deemed to abandon the successful bid project.

Article 85 of the Measures for Tendering and Bidding of Construction Projects and Article 59 of the Measures for Tendering and Bidding of Goods for Construction Projects stipulate that "If the tenderer fails to perform the contract with the successful bidder, the bidder's performance bond shall be returned; If the loss caused exceeds the performance bond returned, compensation shall also be paid for the excess; if no performance bond is submitted, the bid winner shall be liable for the loss. " ^[1]