Contract performance bond combined with final installment

whether it is too late for the performance bond, I can only assess once I have understood it.

**"The performance bond primarily protects the client (you) against damages in the event of the contractor's insolvency. Regardless of this, the client (you) can also fall back on it if the contractually agreed services are not fulfilled or are refused." Tox has already explained who can be a guarantor.

So in my mind’s eye, I walk through the whole house again with my construction-accompanying expert and check whether everything that was agreed upon has been implemented and whether the implementation is okay. And if it is not okay, then you demand rectification or completion and withhold the final payment until then. (Or part of it? Depending on the extent of the defects?)

Basically, that is correct. Although the timing of the payment (final installment) depends on your contract and its basis, VOB/Construction Code.

If the final installment is too small, then this could happen ...

N'est-ce pas?

No.

Because if it would happen as you describe, you would have made a mistake when choosing your construction partner. However, you should have recognized this mistake much earlier – if it were one – and not only at the final installment.

Rhenish regards

So, in my mind's eye, I walk through the entire house again with my construction-accompanying expert and check whether everything that was agreed upon has been implemented and whether the implementation is okay. And if it’s not okay, then you demand rectification or completion and withhold the final payment until then. (Or part of it? Depending on the extent of the defects?)

In our case, it was like this: we walked through... with the site manager... and signed the list of defects. We were told beforehand that the handover of the house only takes place upon final payment. For the general contractor, that would have meant: 100% final payment and then inspection, list of defects, signature, and handover. Then the timely processing of the defect list by the general contractor or his subcontractors. It was all like that, except for our payment of the final installment: we understood it the same way as you. Three days later, a surprise call came from the general contractor that no money had been transferred by us. Oops, we had to catch up on that quickly. So there was no leverage — they don’t allow themselves to be pressured like that. Rather, they send their craftsmen multiple times for rectification, because: it’s supposed to be a quality building without defects!

So, let's break this down.

I. Contract Performance Guarantee

Secures - as the name suggests - the fulfillment of the contract. This guarantee is usually issued by a bank of the contractor. The design should be set to "payment on first demand." In this case, the bank can no longer refuse payment using the legal defenses of the guarantor (which are waived) and cannot delay the payment itself. After the demand by the beneficiary of the guarantee, the bank may only refuse payment if the claim is obviously abusive, which must be proven by so-called "liquid evidence." The wording is important, specifying exactly what must be present for the guarantor's payment to be due. My preference here would be the "notification that the contractor has not fulfilled his obligations under the contract." With such wording, nothing needs to be proven; only a notification must be made.

The contract performance guarantee only makes sense as long as the contract is not fulfilled, i.e., acceptance has not (fully) taken place. Since the contractor must expect the guarantee to be drawn upon in the event of incomplete performance, he will generally feel sufficient pressure to complete the work so that he can then get the guarantee refunded.

II. Warranty Guarantee

This secures any defect claims for the period AFTER contract fulfillment. The contractor can sometimes become "tight" for some time after acceptance and possibly no longer fulfill his obligations to remedy any defects that arise. The agreement on the provision of such a guarantee by the contractor is a matter of negotiation.

In principle, the higher the guarantee, the better the "emergency case" (insolvency of the contractor) is secured. As always, dealing with the contractor’s creditworthiness in advance of contract negotiations helps to reduce such risks.

that scares me. But did you have to pay everything then - I would expect that you could at least withhold part corresponding to the defects? May I ask if you had a construction supervisor (expert)? Although, if they corrected it promptly for you, you didn't have any disadvantage yourself at least because of that. Or did you have a public house construction blog with the name of the construction company? That is of course also a means of pressure.

I believe it was "payment upon house handover"
We were "allowed" to withhold €1000 because the stair steps were still provisional.
And yes: we had and still have a construction blog

Are we really talking about a contract performance guarantee or does the OP perhaps mean a warranty guarantee? That would explain why the OP is struggling with his search and why we are here at the end of the construction project and 5% are to be withheld and we are talking about defects here.

Besides, I have been reading warranty guarantee the whole time, even though it wasn’t written anywhere.

Besides, I read warranty guarantee all the time, even though it was nowhere stated.

It also fit so nicely.

Often, the types of guarantees are combined, sometimes with a clause reducing the amount in the text. However, I also consider the provision of a warranty guarantee quite likely here.