A Quality Guarantee is a written guarantee document issued by a bank or financial institution at the seller's request to the buyer, ensuring that the quality of the goods complies with the contract. If the buyer discovers non-conformity after acceptance and the seller fails to compensate as agreed, the buyer can claim against the bank under the guarantee. It is commonly used in large equipment, turnkey projects, or long-term supply contracts, where the buyer requires the seller to provide a quality guarantee to reduce risk. Notes: The guarantee amount is usually 5%-10% of the contract value, valid until the end of the quality warranty period; claim conditions, required documents (e.g., inspection report, claim statement), and expiry clauses should be clearly specified. Difference from a performance bond: a performance bond guarantees the entire contract performance, while a quality guarantee only covers the quality of the goods; similar to a maintenance guarantee, but a quality guarantee focuses more on compensation for quality non-conformity. Difference from a letter of credit: a letter of credit is a payment instrument, while a quality guarantee is a guarantee for breach compensation.
📝 Examples
1. According to the contract terms, the seller shall provide, before shipment, a Quality Guarantee issued by a first-class bank for 10% of the total contract price, valid until 12 months after equipment acceptance. (Note: In large equipment exports, the buyer requires a quality guarantee as quality assurance.)
2. If the goods, upon inspection, do not conform to the quality standards stipulated in the contract, the buyer has the right to claim against the bank under the Quality Guarantee and submit an SGS inspection report and a claim notice. (Note: Demonstrates the claim conditions and required documents for a quality guarantee.)
💡 Foreign Trade Tips
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