Performance bonds are a vital component of commerce.
They are used in a wide array of instances offering stability as security for breaching of ones obligations.
As they usually are in place to cover the shortcomings of a certain contractual breach they dispense with the need to initiate costly legal procedure.
However many where the times where performance bonds did more harm that the good which they were supossed to offer.
Below are a number of ways in which performance bonds ended up destroying the agreements including them:
- Breach did not satisfy seeking out Performance Bond
When one party fails to carry his promise within a contract then the performance bond covers the innocent party’s
damages. But what if the innocent party was not as innocent in the first place? or did not deserve such compensation as
the breach seemingly breach the performance bond but in reality the breach wasn’t as huge as to justify the payment of the bond.
- Unjus Enrichment.
This could be a scenario where the beneficiary of the performance bond sought it out upon breach of its condition to continue to be extended
got its borrowers account settled and thus the borrower now profiterring at the land vendor’s expense as he’s losing of his share of the
sell price by owing that very share of money to his bank.
- THE PERFORMANCE BOND IS PRESSING ON THE ISSUING PARTY.
in this situation the performance being there can out a lot of strain to either party to perform the contract
in fear that if it doesn’t it will have to cover its breach through a huge payout by the perfomance bond so that
he is too stressed to overcompensate for the trivial parts of the contract, often with negative consequences as it has to
prioritize that business and failing to look after the other ones, causing harm to his business cycle and the collective in general.
