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A Performance guarantee is a legally binding commitment where a third party (usually a bank) promises to pay a set amount if someone fails to meet their obligations. In Belgium, these guarantees are commonly used in construction projects, public tenders, and major business contracts to protect the beneficiary against non-performance.

Belgian law treats these guarantees as independent obligations, meaning the bank must pay upon request without investigating the underlying dispute. This "first demand" nature makes them powerful tools for risk management, though courts may block payment if there's clear fraud. Banks typically require collateral before issuing these guarantees and charge annual fees based on the guaranteed amount.

Performance guarantees become essential when entering high-value contracts in Belgium, especially for construction projects, large equipment deliveries, or government tenders. They protect your interests when significant money is at stake and you need assurance that your contractor or supplier will deliver as promised.

Banks in Belgium typically issue these guarantees for major business deals worth over €100,000, infrastructure projects, or when working with new international partners. They're particularly valuable when your contract involves staged payments, lengthy delivery times, or complex technical specifications where failure would cause serious financial damage. The guarantee gives you immediate access to compensation if things go wrong.

• Performance Guarantee Bond: Issued by banks or insurance companies, typically for construction and public works projects. Guarantees payment up to a fixed amount if the contractor fails to perform.
• Corporate Performance Guarantee: Provided by a parent company or affiliated business entity to guarantee a subsidiary's obligations. Common in group structures and international trade, offering less immediate payment but stronger long-term backing.

• Banks and Financial Institutions: Issue performance guarantees after assessing risks and typically require collateral from the principal party.
• Project Owners/Beneficiaries: Request these guarantees to protect their investments in construction, procurement, or service contracts.
• Contractors and Suppliers: Provide these guarantees as security for their contractual obligations, often paying annual fees to banks.
• Legal Counsel: Draft and review guarantee terms to ensure compliance with Belgian law and protect their client's interests.
• Corporate Treasury Teams: Manage guarantee portfolios and maintain relationships with issuing banks.

• Basic Details: Gather exact names and registration numbers of all parties, including the bank, principal, and beneficiary.
• Contract Specifics: Document the underlying contract value, completion dates, and specific obligations being guaranteed.
• Guarantee Amount: Calculate the required guarantee sum (typically 5-15% of contract value in Belgium).
• Duration Terms: Define the guarantee's start date and expiry conditions clearly.
• Payment Triggers: Specify exact conditions that will activate the guarantee payment.
• Template Selection: Use our platform to generate a legally-compliant Belgian performance guarantee, ensuring all mandatory elements are included.

• Parties' Information: Full legal names, registration numbers, and addresses of guarantor, principal, and beneficiary.
• Guarantee Amount: Clearly stated maximum sum in euros and payment currency specifications.
• Trigger Conditions: Precise circumstances that activate the guarantee payment obligation.
• Duration Clause: Explicit start date and expiry conditions following Belgian civil code requirements.
• Demand Process: Detailed procedure for making claims under Belgian banking regulations.
• Governing Law: Explicit reference to Belgian law and jurisdiction.
• Execution Requirements: Signature blocks with proper authority declarations.

A Performance guarantee is often confused with a Bank Guarantee, but they serve distinct purposes in Belgian business law. While both provide financial security, their scope and application differ significantly.

• Purpose and Scope: Performance guarantees specifically cover the completion of contractual obligations, while bank guarantees can secure various financial commitments, including loans, payments, or tenders.
• Trigger Conditions: Performance guarantees activate only upon failure to complete specific contracted work or services. Bank guarantees can be triggered by broader financial defaults or conditions.
• Duration Structure: Performance guarantees typically align with project timelines and include completion milestones. Bank guarantees often have simpler, fixed terms based on payment schedules.
• Risk Assessment: Banks evaluate technical project capabilities when issuing performance guarantees, while bank guarantees focus mainly on financial creditworthiness.