The Performance Bond

The Contractor signed with the Supplier a contract for the supply of certain major components in respect of the revamping of a power station in Middle East. The contract provided the issue of a Performance Bond to secure the proper and timely performance of the Supplier's obligations.

Giuseppe Broccoli, Elisabetta Ventrella and Fabio Zanchi have contributed to the 'Doing Business 2018: Reforming to create jobs' survey for Italy in respect of the following sections:

BdaLaw is honored to have contributed to the 12th edition of Construction, a volume in the Getting the Deal Through series of annual reports which provides international analysis in key areas of law and policy for corporate counsel, crossborder legal practitioners and business people.

The Performance Bond is a guarantee which secures the Employer from the risk of possible breaches by the Contractor during the execution of the works. It can be risky for the Contractor for several reasons and above all because it is a guarantee which remains in force for the entire life of the construction project.

In international construction projects, it is rather standard that the Contractor starts the mobilisation/procurement just after an advance payment has been paid by the Employer. But how does it work and how can you negotiate it at your best?

In construction contracts, disputes are extremely  frequent  especially in international projects. The claiming is almost inevitable and controversies concerning extra works,  extension  of time, liquidated damages for (alleged or actual) delay of the Contractor, or for the calling of the bonds issued by the Contractor for (alleged or actual) default from the Contractor itself are almost the ordinary course of a project.