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A Performance guarantee is a binding promise where one party (usually a bank or insurance company) agrees to pay compensation if another party fails to fulfill their contractual obligations. In the Philippines, these guarantees commonly protect government agencies and private businesses when dealing with contractors, suppliers, or service providers.

Under Philippine law, these guarantees serve as a risk management tool, giving project owners and clients peace of mind. They typically cover 10-30% of the contract value and remain valid until project completion or warranty period expiration. The Civil Code of the Philippines recognizes them as security instruments, making them legally enforceable through local courts.

Use a Performance guarantee when undertaking major construction projects, government contracts, or large-scale supply agreements in the Philippines. This protection becomes essential for infrastructure projects, building developments, and procurement contracts where project delays or contractor defaults could cause significant financial losses.

Banks and insurance companies in the Philippines issue these guarantees for contracts valued above ₱500,000, especially in public bidding scenarios. The guarantee proves particularly valuable when working with new contractors, managing complex multi-year projects, or fulfilling requirements for government tenders under the Government Procurement Reform Act (RA 9184).

• Performance Bank Guarantee: Standard bank-issued guarantee covering contractor performance, typically 10% of contract value
• Advance Performance Guarantee: Secures advance payments made before work begins, protecting against misuse of funds
• Financial Guarantee And Performance Guarantee: Comprehensive coverage combining both financial stability and performance obligations
• Performance Security Bank Guarantee: Enhanced security instrument often required for government contracts under RA 9184

• Banks and Insurance Companies: Issue the Performance guarantee and assume financial responsibility if defaults occur
• Government Agencies: Require guarantees from contractors bidding on public projects under RA 9184
• Construction Companies: Obtain guarantees to secure major building contracts and infrastructure projects
• Corporate Legal Teams: Draft and review guarantee terms to ensure compliance with Philippine regulations
• Project Owners: Benefit from financial protection against contractor non-performance or delays
• Suppliers and Service Providers: Secure large-scale contracts by providing performance guarantees to clients

• Contract Details: Gather complete project scope, timeline, and contract value to determine guarantee amount
• Party Information: Compile legal names, addresses, and registration details of all involved parties
• Guarantee Terms: Specify duration, conditions for calling the guarantee, and payment timeline
• Documentation: Prepare supporting documents like contractor licenses and project approvals
• Legal Requirements: Check compliance with Philippine banking regulations and RA 9184 if applicable
• Digital Solution: Use our platform to generate a legally-sound Performance guarantee that includes all mandatory elements
• Internal Review: Verify all terms match project requirements before finalization

• Party Details: Full legal names, addresses, and registration numbers of guarantor, principal, and beneficiary
• Guarantee Amount: Specific sum in Philippine Peso, typically 10-30% of contract value
• Scope of Coverage: Detailed description of guaranteed obligations and performance standards
• Validity Period: Clear start and end dates, including any automatic extension provisions
• Demand Conditions: Precise circumstances under which the guarantee can be called
• Payment Terms: Timeline and method for honoring claims under Philippine banking regulations
• Governing Law: Express reference to Philippine law and jurisdiction
• Execution Block: Authorized signatures, corporate seals, and notarization requirements

A Performance guarantee differs significantly from a Bank Guarantee in several key aspects under Philippine law. While both provide financial security, their purposes and applications vary considerably.

• Scope of Coverage: Performance guarantees specifically secure the completion of contractual obligations and quality standards, while bank guarantees can cover various financial obligations like loans or payments
• Trigger Events: Performance guarantees activate upon failure to meet specific project milestones or quality standards; bank guarantees typically trigger on payment defaults
• Duration: Performance guarantees usually last throughout the project period plus warranty phase; bank guarantees often have shorter, fixed terms
• Value Calculation: Performance guarantees typically range from 10-30% of contract value; bank guarantees often match the full amount of the underlying financial obligation
• Regulatory Framework: Performance guarantees fall under construction and procurement laws (RA 9184), while bank guarantees primarily follow banking regulations