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Performance Bond

Truth:

A Performance Bond is a bond that insures an underlying contract between a Buyer and a Seller.  It may be purchased from an insurance company (called a Surety Bond) or it may be cash held in an escrow account, or it may be a STANDBY LETTER OF CREDIT.

However the bond is put in place, the BENEFICIARY is insured against against the event that the purchaser fails to perform in accordance with the underlying contact or acts in violation of the underlying contract.

Scam:

"Performance Bond" is a term that is used constantly in the UNDERGROUND NETWORK, particularly if the so-called deal involves OIL, GOLD, frozen chicken parts, scrap ships, teak, urea, sugar, or wheat.

The term is used lightly, as if obtaining a Performance Bond were no more difficult than buying a money order.

The fact is that one cannot obtain a Performance Bond without a good deal of paperwork; for one thing, no insurance company is going to issue a bond against thin air.  It must know what it is insuring and must verify that all is above-board, and that all documents have been correctly filed.  In other words, perform it's due diligence to protect itself against insurance fraud.

Cash in an escrow account means the full value due the Beneficiary should there be a default or violation of the underlying contract.

A Standby Letter of Credit is documentary and requires an application to a bank by a creditworthy customer.  This means that documents, which will be examined, pertaining to the conditions of the Standby must be presented along with the application.

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