Payment usually takes place in instalments in the capital goods industry. A client or purchaser therefore runs the risk that if the contractor or supplier does not fulfil its obligations, damage is suffered. Extra costs then have to be incurred in order to have the work performed or product supplied by another contractor or supplier.
Performance bonds cover the performance and delivery obligations of a contractor or supplier to the business partner. This is stated in a contract between these parties.
- Your business partner is certain that you will follow through on the agreements in your contract
- The guarantee amount is usually 10% of the transaction value