Construction Guarantee
Types Description
Bid guarantee Before a bidder makes a tender, a guarantor strictly verifies the qualification of the bidder and provides the bidder with the tender guarantee so as to ensure that the bidder participates in bidding activity in accordance with the requirements stated in the bidding document. Once the bidder is awarded the tender, the guarantor will promptly conclude a construction contract with the bidder, and will provide the bidder with the required letter of guarantee for execution of contract and advance payment. If the bidder is in breach of the contract, the guarantor will compensate the bidder’s losses according to the sum insured.
Performance guarantee It is provided by the guarantor for the construction party (applicant) and employer (beneficiary), ensuring the construction party fulfils the duties and obligations specified in the construction contract. If the contractor fails to execute the contract, the employer can request the guarantor to bear the liability for guarantee on the basis of the sum insured. Then the guarantor can make a claim to the contractor for compensation in conformity with the law. Generally, the performance guarantee provided by a guarantee company is conditional, which means the employer must submit the evidence of nonperformance of the contractor whenever the employer makes a claim. After verification, the guarantor shall accept the liability for guarantee. Performance guarantee is applicable to the performance of sub-contract and material supply contract.
Payment guarantee The employer shall fulfill the payment requirement as stipulated under the construction contract. This guarantee made by the guarantor on behalf of the employer will ensure that the employer must make a payment guarantee for the contractor. While the employer is signing the construction contract, it must submit the payment guarantee to the contractor. Failing the submission of the payment guarantee, the construction funds will be deemed as unavailable.
Advance payment guarantee The guarantor promises the contractor that it will fulfill the advance payment guarantee, so as to prevent the contractor from appropriating the advance or declaring bankruptcy. After the contractor has paid up all the prepayments within the agreed time, the employer needs to return the advance payment guarantee.
Performance guarantee of sub-contract When a construction project involves a general contractor and sub-contractors, the general contractor shall take up sub-contractors’ responsibilities. The general contractor always requests the subcontractors to provide a guarantee by means of a guarantor with a view to protecting its own rights and interests and preventing the subcontractors from violating the contract or getting into debt.
Application for bank guarantee
A guarantor will apply to a bank for “line of credit of bank” on behalf of an applicant so as to handle the guarantee business. After the application is approved, when the applicant wants to make cooperation with the guarantor again, the guarantor can submit some parts of the information to the bank on behalf of the applicant, and less information is needed and the bank guarantee can be obtained, which has eliminated the approval process for the applicant’s information before issuing the bank guarantee.
Performance bond At the request of a labor party or a bidder (applicant), a guarantor will give a performance guarantee to the project owner (beneficiary). Once the bidder (applicant) is awarded the tender, the guarantor is able to continue giving the owner the performance bond on behalf of the winning bidder; otherwise, the guarantor will bear the liability for compensation for the beneficiary.
Credit certification The background of credit certification: when a project needs open tender, the intended bidders will submit material for the tender. And sometimes, in view of various reasons, party A will conduct the prequalification, and only those builders who pass the prequalification can make the tender; when party A is conducting the prequalification, it will request those intended bidders to submit a lot of materials, and the credit certification is one of the materials that are often required to be submitted.
Guarantee of quality warranty The guarantor gives the buyer (beneficiary) a guarantee to ensure the developer (applicant) fulfils the warranty obligation within the warranty period according to the “Purchase Contract” and “Certificate of Quality”. Unless it is the buyer’s reason or force majeure, if the developer fails to fulfill its warranty obligation agreed in the above document, the buyer has the right to require the guarantor to bear the contractual obligation or pay the damages.


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