What Is a Performance Guarantee?
A performance guarantee is a promise that an obligation will be completed as agreed — and a commitment to make it right if it is not. It assures one party that the work, delivery, or contractual duty owed by another will actually be performed, often backed by a third party or by security such as a bond. It protects against the risk of non-performance, not just non-payment.
Common Forms
- Performance bond — a surety company guarantees a contractor will complete the project, paying to finish or compensating the owner if the contractor defaults
- Personal or corporate guarantee — a third party promises to perform or cover the cost if the primary party fails
- Letters of credit or escrow — funds held to ensure performance
Where It Is Used in Florida
Performance guarantees are central to construction and development, where owners and public agencies require bonds before work begins, and in supply and service contracts. On public projects, Florida law requires payment and performance bonds under the state's "Little Miller Act" framework. The guarantee's terms define exactly what triggers it and what the guarantor must do, so precise drafting is essential.
Related Terms
- Surety Bond — A common vehicle for a performance guarantee
- Guarantor — Who stands behind the obligation
- Breach of Contract — What a performance guarantee protects against
Barnes Walker
Barnes Walker's attorneys handle construction, bonding, and guarantee issues for Florida owners, contractors, and businesses. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC