What is the reason for using performance bond and guarantee cheque in contract business?

A performance bond is a guarantee which is issued to one party against the failur of the other party, if the other party fails to meet the obligations mentioned in the contract.

E.g. in a construction contract, the contractor may issue a bond to a the client for whom the house is being constructed. if the contractor fails to meet the specifications of the house as in the contract, the client is guaranteed that a compensation will be paid for the monetary loss.

A performance bond is a guarantee which is issued to one party against the failur of the other party, if the other party fails to meet the obligations mentioned in the contract.

E.g. in a construction contract, the contractor may issue a bond to a the client for whom the house is being constructed. if the contractor fails to meet the specifications of the house as in the contract, the client is guaranteed that a compensation will be paid for the monetary loss.

If you're bidding on domestic or international contracts you're often required to demonstrate your performance capability or ability to meet your contractual obligations by posting guarantees. If the success of an important contract hinges on a guarantee that you are able to perform or pay, your business could benefit from Guarantees from RBC. A Guarantee is an essential tool to help your business establish its performance capability and financial integrity with clients and suppliers.