Performance bond is a kind of financial guarantee for buyers and sellers to ensure performance. Traders in the futures market must deposit a certain amount of performance bond when trading. The amount of bonds is set by the exchange that provides contract transactions, usually 5- 15% of the total contract value. Of course, brokers or entrusted brokers will also set an additional margin on their own, which will not be lower than the level set by the exchange. The performance bond emphasizes the protection of the interests of the tenderer or investors, which can be shared by the winning contractor and the third party, provided that the tenderer recognizes that the party is effective and the third party bears joint and several liabilities, so it is replaceable. The performance bond is independent and must be collected, stored, executed and returned by institutions recognized by both parties.
What are the types of performance guarantees?
Performance guarantee of project contract, performance guarantee of project bidding, performance guarantee of technology transfer contract, performance guarantee of trade contract, real estate transaction guarantee, motor vehicle transaction guarantee, security guarantee of house property right transfer transaction, contract hedging deposit/prepayment/quality guarantee, agency fee/commission guarantee, product quality guarantee, economic guarantee for studying abroad, personal installment payment guarantee, litigation preservation guarantee, etc. A bank performance bond is a guarantee certificate issued by a commercial bank, which is usually about 10% of the contract amount. Bank guarantee is divided into conditional bank guarantee and unconditional bank guarantee.
1. Conditional guarantee refers to the following situations:
When the contractor fails to perform the contract or perform the contractual obligations, the employer or supervision engineer will issue a certificate to explain the situation, and the guarantor will identify the executed part and the unexecuted part. The bank guarantee can only be cashed after confirmation, and the tenderee will get the money in the guarantee. The construction industry usually tends to adopt this form of guarantee.
2. Unconditional guarantee refers to the following situations:
When the contractor fails to perform the contract or perform the contractual obligations, the employer does not need to issue any certificates and reasons. As long as you see the contractor's breach of contract, you can change the bank guarantee. When the contractor breaches the contract, the guarantee company or insurance company that issued the letter of guarantee will use the deposit to complete the construction task or pay the deposit to the employer. Where the project procurement project deposit is provided in the form of guarantee, the amount is generally 30%-50% of the contract price. The performance bond can be confirmed check, bank draft or cash check, and the amount is10% of the contract price;
Legal basis;
Regulations of People's Republic of China (PRC) Municipality on the Implementation of the Bidding Law
Article 58 If the tender documents require the winning bidder to submit a performance bond, the winning bidder shall submit it in accordance with the requirements of the tender documents. The performance bond shall not exceed 10% of the winning contract amount.
Article 59 The winning bidder shall fulfill its obligations in accordance with the contract and complete the winning project. The winning bidder shall not transfer the winning project to others, nor shall it dismember the winning project and transfer it to others separately.
The winning bidder may, according to the contract or with the consent of the tenderer, subcontract part of the non-major and non-critical work of the winning project to others for completion. The person who accepts subcontracting shall have corresponding qualifications and shall not subcontract again.
The winning bidder shall be responsible to the tenderer for the subcontracted project, and the subcontractor shall be jointly and severally liable for the subcontracted project.