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A Performance guarantee is a binding promise where one party (usually a bank or insurance company) agrees to pay a specific amount if another party fails to meet their obligations. In Singapore's construction and trade sectors, these guarantees protect project owners and buyers when contractors or suppliers don't deliver as promised.

These guarantees work like a safety net - they're payable on demand without needing to prove a breach first. The Singapore courts generally uphold this 'pay first, argue later' principle, making them a powerful tool for managing business risks. Companies often need them for major government contracts, construction projects, and international trade deals.

Performance guarantees become essential when undertaking major construction projects, government tenders, or significant supply contracts in Singapore. They're particularly important for project owners working with new contractors, international suppliers, or on high-value developments where financial risks need careful management.

Use them when your contract value exceeds S$200,000, when dealing with public sector projects, or in situations where contractor default could severely impact project timelines or budgets. Many government agencies and large commercial developers in Singapore require these guarantees before contract signing, especially for infrastructure projects, building works, and major procurement deals.

• Performance Guarantee Bond: The standard form used in construction projects, issued by banks or insurers, typically for 5-10% of contract value
• Advance Performance Guarantee: Specifically covers advance payments made to contractors, ensuring refund if work isn't completed
• Contract Performance Guarantee: Broader coverage for all contractual obligations, commonly used in supply and service agreements
• Corporate Performance Guarantee: Issued by parent companies for their subsidiaries' obligations, particularly in group structures

• Project Owners/Developers: Require and hold these guarantees as protection against contractor default, commonly seen in construction and infrastructure projects
• Banks/Financial Institutions: Issue performance guarantees after assessing the contractor's creditworthiness and usually require counter-indemnities
• Contractors/Suppliers: Provide these guarantees to win contracts and demonstrate financial capability to complete projects
• Government Agencies: Mandate performance guarantees for public tenders and major infrastructure works
• Legal Counsel: Draft and review guarantee terms to ensure enforceability under Singapore law

• Project Details: Gather exact contract value, project timeline, and scope of work being guaranteed
• Party Information: Collect full legal names, registration numbers, and addresses of all involved parties
• Guarantee Amount: Calculate the required sum (typically 5-10% of contract value in Singapore)
• Duration Terms: Define the guarantee period, including start date and expiry conditions
• Payment Triggers: Specify clear conditions for when the guarantee becomes payable
• Template Selection: Use our platform's Singapore-compliant templates to ensure all mandatory elements are included
• Internal Review: Check all details against the main contract before finalizing

• Parties' Details: Full legal names, registration numbers, and registered addresses of guarantor, beneficiary, and principal
• Guarantee Amount: Specific sum and currency, stated clearly and unambiguously
• Scope of Guarantee: Detailed description of guaranteed obligations and underlying contract reference
• Demand Conditions: Clear terms for making claims and required documentation
• Duration Clause: Explicit start date and expiry conditions
• Payment Terms: Timeframe and method for honoring guarantee claims
• Governing Law: Express statement that Singapore law applies
• Execution Block: Proper signature sections with company stamp requirements

Performance guarantees are often confused with Bank Guarantee, but they serve distinct purposes in Singapore's legal framework. While both provide financial security, their applications and requirements differ significantly.

• Scope of Coverage: Performance guarantees specifically secure the completion of contractual obligations, while bank guarantees can cover various financial commitments including loans, advance payments, or tender deposits
• Trigger Events: Performance guarantees activate upon failure to meet specific project milestones or quality standards, whereas bank guarantees typically respond to financial defaults
• Duration: Performance guarantees usually align with project timelines and include maintenance periods, while bank guarantees often have fixed terms tied to specific financial obligations
• Documentation Required: Performance guarantees need detailed project specifications and milestones, but bank guarantees focus more on financial terms and credit arrangements