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This document provides an overview of performance bonds (also known as independent guarantees), including:
- Performance bonds are undertakings by an issuer (bank) to pay a beneficiary if a certain event occurs, such as a demand. Payment is not contingent on proving the applicant defaulted.
- They are commonly used to guarantee contract performance in international construction and sales.
- The key parties are the issuer, applicant, and beneficiary. The issuer pays the beneficiary upon demand, and is later reimbursed by the applicant.
- While beneficiaries can demand payment without proving default, the underlying intent is usually that payment only occurs if the applicant breached the contract. However, disputes between the applicant and
This document provides an overview of performance bonds (also known as independent guarantees), including:
- Performance bonds are undertakings by an issuer (bank) to pay a beneficiary if a …