Performance Bond Letter of Guarantee Sample

A performance bond, also known as a letter of guarantee, is a vital tool used in various financial and construction transactions. It serves as a promise by a financial institution to compensate the project owner if the contractor fails to fulfill their contractual obligations.

Here is a sample of a performance bond letter of guarantee:

[Your Company's Letterhead]

[Date]

[Project Owner’s Name]

[Project Owner’s Address]

Subject: Performance Bond Letter of Guarantee

Dear [Project Owner's Name],

We, [Financial Institution’s Name], hereby issue this performance bond letter of guarantee to [Project Owner's Name] for the [Project Name]. This letter serves as a guarantee for the proper performance of [Contractor's Name], the contractor responsible for carrying out the project.

Principal: [Contractor's Name]

Address: [Contractor's Address]

Project: [Project Name]

Contract Amount: [Contract Value]

1. Scope of Guarantee: This performance bond letter of guarantee ensures that, in the event that the contractor fails to fulfill their contractual obligations as stated in the agreement, [Financial Institution’s Name] will compensate the project owner up to the maximum value of the contract amount.

2. Conditions for the Guarantee:

a. The guarantee shall remain valid until [date] or until the completion of the project, whichever is earlier.

b. Any claims made against this performance bond letter of guarantee must be submitted in writing to [Financial Institution’s Name] within [number of days] days from the date of the contractor's default.

c. [Financial Institution’s Name] shall undertake an investigation and verification process to assess the validity of the claim and may request additional documentation or evidence.

d. The maximum liability of [Financial Institution’s Name] shall be limited to the contract amount.

e. This guarantee is in no way transferable and is solely for the benefit of the project owner.

3. Claim Procedure: In the event of a default by the contractor, [Project Owner's Name] shall submit a written claim to [Financial Institution’s Name] within the specified time frame. The claim should include details of the default, relevant supporting documents, and evidence of the contractor's failure to meet their contractual obligations.

4. Indemnification:

a. [Project Owner's Name] undertakes to indemnify and hold [Financial Institution’s Name] harmless from any claims, losses, or damages arising from their acts or omissions, except in the case of gross negligence or willful misconduct of [Financial Institution’s Name].

b. [Project Owner's Name] acknowledges that [Financial Institution’s Name] shall not be liable for any indirect, incidental, or consequential damages.

5. Governing Law and Jurisdiction: This performance bond letter of guarantee shall be governed by and construed in accordance with the laws of [Jurisdiction]. Any disputes arising from this guarantee shall be submitted to the exclusive jurisdiction of the courts of [Jurisdiction].

Please acknowledge your acceptance and understanding of this performance bond letter of guarantee by signing below and returning a copy to [Financial Institution’s Name].

Thank you for your attention to this matter.

Sincerely,

[Your Name]

[Your Designation]

[Financial Institution’s Name]

[Contact Information]