Performance bond

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Trade finance.

A performance bond is an instrument issued by a bank or an insurance company, in favour of a buyer, on behalf of a supplier, as additional assurance to the buyer that the supplier will perform its obligations under the supply contract.

Such a bank bond or insurance company bond will be supported by an indemnity issued by the supplier in favour of the bank or insurance company.

A performance bond can be called by the buyer in the event of any contract delays or defects in the supplier's performance of the contract.

Also known as a performance guarantee.

See also