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A Performance guarantee is a binding commitment where one party (usually a bank or insurance company) promises to compensate another if a specific obligation isn't met. In Danish business practice, these guarantees often secure construction projects, service contracts, or large-scale deliveries - protecting the beneficiary against non-performance or delays.

Under Danish law, these guarantees must be clearly written, specify exact conditions for payment, and follow the principles outlined in the Danish Financial Business Act. They're particularly common in public tenders and construction projects, where contractors need to provide security for their work. The guarantee becomes payable on first demand, meaning the beneficiary can claim payment without proving actual losses.

Performance guarantees become essential when entering major construction contracts or public tenders in Denmark. They're particularly valuable for project owners working with new contractors or when the project involves significant financial risks. Danish municipalities and government agencies often require these guarantees for infrastructure projects, ensuring they're protected if contractors fail to deliver.

The guarantee proves most useful in complex, long-term projects where performance monitoring is challenging. For example, when building large residential complexes or commercial facilities, having a bank guarantee safeguards against contractor bankruptcy or serious delays. It's also crucial for international contracts where Danish companies work with foreign partners, providing clear financial security under local law.

• Unconditional Bank Guarantees: The most common type in Denmark, requiring immediate payment upon demand without proof of default
• Conditional Performance Guarantees: Require specific conditions to be met before payment, often used in complex construction projects
• Parent Company Guarantees: Used when a subsidiary needs financial backing from its parent corporation
• Insurance-Based Performance Bonds: Popular in public sector projects, issued by insurance companies rather than banks
• Proportional Guarantees: Decrease in value as the project progresses, common in Danish construction contracts under AB 18 rules

• Banks and Financial Institutions: Issue and underwrite Performance guarantees, acting as the guarantor who promises payment
• Construction Companies: Often required to provide guarantees when bidding on or executing major building projects
• Government Agencies: Request guarantees for public tenders and infrastructure projects to protect public funds
• Corporate Legal Teams: Draft and review guarantee terms, ensuring compliance with Danish financial regulations
• Project Owners: Beneficiaries who receive protection against contractor default or non-performance
• Insurance Companies: Provide alternative performance bonds, especially in larger commercial projects

• Project Details: Gather exact scope, timeline, and value of the underlying contract or project
• Party Information: Collect legal names, registration numbers, and addresses of all involved parties
• Guarantee Amount: Calculate the specific sum based on Danish market standards (typically 10-15% of contract value)
• Performance Criteria: Define clear, measurable obligations that trigger the guarantee
• Duration Terms: Specify exact start and end dates, including any automatic extensions
• Payment Conditions: Detail when and how claims can be made under Danish banking regulations
• Document Review: Use our platform's automated checks to ensure compliance with Danish legal requirements

• Identification Section: Full legal names and details of guarantor, beneficiary, and principal party
• Guarantee Amount: Precise sum in Danish Kroner, both in numbers and written form
• Scope Definition: Clear description of the guaranteed obligations under Danish contract law
• Payment Terms: Specific conditions and process for claiming payment, following Danish banking standards
• Validity Period: Exact start and end dates, including any extension provisions
• Governing Law: Explicit reference to Danish law and jurisdiction
• Demand Procedure: Step-by-step process for making claims under the guarantee
• Assignment Clause: Rules regarding transfer of guarantee rights

A Performance guarantee differs significantly from a Bank Guarantee in several key aspects, though both provide financial security. While a Performance guarantee specifically covers the completion of contractual obligations, a Bank guarantee can serve various financial purposes beyond just performance assurance.

• Scope of Coverage: Performance guarantees focus exclusively on project completion and quality standards, while Bank guarantees can cover various financial obligations including loans, payments, or tenders
• Triggering Events: Performance guarantees activate only upon failure to meet specific project milestones or quality standards, whereas Bank guarantees may be called upon for broader financial defaults
• Duration Structure: Performance guarantees typically align with project timelines and include post-completion warranty periods, while Bank guarantees often have simpler, fixed terms
• Risk Assessment: Performance guarantees require detailed evaluation of technical capabilities and project specifics, while Bank guarantees focus primarily on financial creditworthiness