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A Performance guarantee is a binding promise where a bank or insurance company commits to pay a specific amount if someone fails to meet their obligations. In Swiss business practice, these guarantees are commonly used in construction projects, export deals, and large commercial contracts to protect against non-performance or delays.

Unlike standard contracts, Swiss performance guarantees are "abstract" - meaning the guarantor must pay immediately upon request, without questioning the underlying relationship between the parties. They're regulated under Swiss Code of Obligations Article 111, offering stronger protection than simple contractual promises and functioning similarly to standby letters of credit in international trade.

Performance guarantees make the most sense when you're working on high-value projects in Switzerland where trust needs extra backing. Construction companies often need them when bidding on major developments, as they reassure project owners that the work will be completed as promised. Similarly, manufacturers use them when supplying expensive equipment or complex installations.

These guarantees prove especially valuable in international trade deals, where Swiss exporters need to demonstrate financial reliability to foreign buyers. They're also crucial for government contracts, infrastructure projects, and any situation where project delays or failures would cause significant financial damage. The guarantee amount typically ranges from 5% to 15% of the contract value.

• Performance Guarantee Bond: This is the standard Swiss format, typically issued by banks or insurers, where payment is guaranteed upon first demand. It can be customized with specific completion milestones, payment schedules, and expiry dates. The bond usually includes precise trigger conditions, claim procedures, and may be either conditional (requiring proof of default) or unconditional (payable on simple demand).

• Banks and Insurance Companies: Act as guarantors, issuing Performance guarantees after assessing the contractor's creditworthiness and capacity to fulfill obligations.
• Construction Companies and Contractors: Obtain guarantees to secure their bids and demonstrate financial reliability for large projects.
• Project Owners and Developers: Request guarantees as security against contractor default or delays, particularly in real estate and infrastructure projects.
• Legal Counsel: Draft and review guarantee terms, ensuring compliance with Swiss banking and contract law requirements.
• Government Agencies: Require performance guarantees for public tenders and infrastructure contracts.

• Contract Details: Gather the underlying contract's value, scope, and completion timeline to determine appropriate guarantee amount.
• Party Information: Collect complete legal names and addresses of the principal, beneficiary, and guarantor bank/insurer.
• Performance Metrics: Define specific milestones, quality standards, or completion criteria that trigger guarantee activation.
• Duration Terms: Establish clear start and expiry dates, plus any automatic extension conditions.
• Payment Terms: Specify guarantee amount, currency, and exact conditions for payment demands.
• Platform Support: Use our automated system to generate a legally compliant Performance guarantee that includes all required Swiss legal elements.

• Identification Details: Full legal names and addresses of principal, beneficiary, and guarantor bank/insurer under Swiss law.
• Guarantee Amount: Precise sum and currency, stated both in numbers and words to avoid ambiguity.
• Trigger Conditions: Clear description of events that activate the guarantee, following Swiss Code of Obligations requirements.
• Payment Terms: Specific timeframe and method for payment upon valid demand.
• Expiry Provisions: Explicit end date or conditions for guarantee termination.
• Governing Law: Clear statement designating Swiss law and jurisdiction.
• Declaration Clause: Bank's unconditional promise to pay, formatted according to Swiss banking standards.

A Performance guarantee is often confused with a Bank Guarantee in Swiss business transactions. While both provide financial security, they serve different purposes and operate under distinct legal frameworks.

• Scope and Purpose: Performance guarantees specifically cover the completion of contracted work or services, while bank guarantees can secure various financial obligations, including loans, rent, or customs duties.
• Trigger Events: Performance guarantees activate upon failure to complete specific contractual obligations. Bank guarantees respond to broader financial defaults or specified conditions.
• Risk Assessment: Banks evaluate technical completion capability when issuing performance guarantees, whereas bank guarantees focus primarily on financial creditworthiness.
• Duration: Performance guarantees typically align with project timelines and include specific milestones. Bank guarantees often have simpler, fixed terms based on financial obligations.