Performance Bond: Introduction

The Performance Bond is a guarantee which ensures the prompt payment  to the beneficiary (the Purchaser or the Owner) of a certain amount of money -from a Guarantor- in the case the Supplier or the Contractor is in breach of its contractual obligations. 

In international transactions, it is standard practice that the performance bond is in the form of an on-demand bond.

It is normally used in international construction contrasts, in international sale and purchase agreement or in international service contracts.

Let's define some terms which will be used in this article:

(a) beneficiary: it is the subject in favour of which the bond is issued and who will be entitled to request the payment in case of default of the other party;