Performance Guarantees: the Georgian Model
The state performance-bond schemes widespread in international construction practice do not exist in Georgian legislation. What exists here is the civil-law institution of the guarantee and its most common form — the bank guarantee — which secures the performance of the underlying obligation under the construction contract. In other words, a performance guarantee in Georgia is a contractual instrument, not a security layer established automatically by legislation.
Under a bank guarantee, a bank, other credit institution or insurance organization — the guarantor — at the principal’s request undertakes a written obligation to pay the beneficiary a monetary amount in accordance with the obligation assumed, on the basis of the beneficiary’s written demand. The convenience of the guarantee lies precisely in the fact that it redistributes the risk of the contractor’s performance onto a third, financially stable person.