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A Performance guarantee is a binding promise from a bank or financial institution to pay a specific amount if someone fails to meet their obligations. In Hong Kong's construction and trade sectors, these guarantees protect project owners when contractors don't complete work as agreed or suppliers don't deliver promised goods.

Unlike traditional bonds, performance guarantees are payable immediately when called upon, without needing to prove actual losses. Hong Kong courts generally uphold their "pay first, argue later" nature, making them a powerful tool for managing business risks. Banks typically require counter-indemnities from the party getting the guarantee, ensuring they can recover any payments made.

Performance guarantees become essential when you're working on major construction or infrastructure projects in Hong Kong. They're particularly valuable when hiring contractors for significant building works, securing large supply contracts, or entering into complex commercial agreements where project completion is critical.

Banks commonly require these guarantees for property developments, MTR projects, and government tenders. They're also vital when dealing with overseas suppliers or contractors without established track records in Hong Kong. The guarantee offers immediate protection against default, helping you maintain project timelines and manage financial risks, especially in deals worth over HK$10 million.

• Advance Performance Guarantee: Secures upfront payments made before work begins, common in construction projects
• Performance Guarantee Agreement: Standard form covering overall project completion, typically used for large commercial contracts
• Payment Agreement Letter: Simplified guarantee format focusing specifically on payment obligations and milestones

• Project Owners: Commercial developers, government departments, and MTR Corporation who require protection for large-scale projects and contracts
• Banks and Financial Institutions: Issue the performance guarantees and assess the financial standing of contractors or suppliers
• Contractors and Suppliers: Must obtain these guarantees to secure major projects, often providing counter-indemnities to their banks
• Legal Advisors: Draft and review guarantee terms, ensuring compliance with Hong Kong banking regulations and construction law

• Project Details: Gather exact scope of work, contract value, and completion timeline from the main contract
• Guarantee Amount: Calculate the required sum, typically 10-15% of contract value in Hong Kong
• Party Information: Collect full legal names, registration numbers, and addresses of all parties including the issuing bank
• Trigger Events: Define specific conditions that allow calling on the guarantee
• Document Generation: Use our platform to create a legally-sound performance guarantee that includes all required elements

• Guarantee Amount: Clear statement of the maximum sum guaranteed, in Hong Kong dollars
• Beneficiary Details: Full legal name and address of the party receiving protection
• Demand Mechanism: Specific procedure for making claims under the guarantee
• Expiry Terms: Clear end date or conditions for guarantee termination
• Governing Law: Express choice of Hong Kong law and jurisdiction
• Bank Details: Complete information of the issuing bank, including branch code
• Enforcement Clause: "Pay first, argue later" provision ensuring immediate payment upon valid demand

A Performance guarantee differs significantly from a Bank Guarantee in several key aspects, though both are common in Hong Kong's business landscape.

• Scope and Purpose: Performance guarantees specifically cover project completion or service delivery, while bank guarantees can secure any financial obligation, including loans or credit facilities
• Trigger Conditions: Performance guarantees activate upon failure to complete agreed work or meet quality standards, whereas bank guarantees typically trigger on payment default
• Duration: Performance guarantees usually align with project timelines and include completion milestones, while bank guarantees often have fixed terms tied to loan periods
• Documentation Required: Performance guarantees need detailed project specifications and completion criteria, but bank guarantees focus mainly on financial terms and repayment schedules