The Contract Performance Guarantee is a crucial document in UAE business transactions, particularly in sectors requiring significant contractual commitments. It serves as a risk mitigation tool where one party (typically a bank) guarantees the performance obligations of another party under a primary contract. The guarantee must comply with UAE Federal Law No. 5 of 1985 (Civil Code) and Federal Law No. 18 of 1993 (Commercial Code), and often incorporates international banking practices. The document becomes especially important in government contracts, construction projects, and large commercial transactions where parties seek security for performance obligations. A Contract Performance Guarantee typically specifies the guaranteed amount, validity period, conditions for demand, and payment terms, providing a clear mechanism for the beneficiary to claim compensation in case of the principal's default.
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1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Beneficiary (party receiving the guarantee), and the Principal (party whose obligations are being guaranteed)
2. Background: Details of the underlying contract or obligation being guaranteed, including reference numbers and dates
3. Definitions: Key terms used in the guarantee, including 'Guaranteed Amount', 'Expiry Date', and 'Demand Notice'
4. Guarantee: Core provision stating the guaranteed amount and the guarantor's unconditional undertaking to pay
5. Term and Validity: Duration of the guarantee, including start date, expiry date, and any automatic extension provisions
6. Demand Requirements: Procedure and conditions for making a demand under the guarantee, including format and supporting documentation requirements
7. Payment Terms: Timeframe and method for payment upon receipt of a valid demand
8. Reduction and Release: Conditions under which the guarantee amount may be reduced or the guarantee released
9. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction of UAE courts
1. Assignment: Include when the guarantee needs to be transferable or when assignment needs to be specifically prohibited
2. Language Precedence: Include when the guarantee is bilingual to specify which language version prevails
3. Multiple Demands: Include when multiple partial demands are allowed under the guarantee
4. Force Majeure: Include for longer-term guarantees to address extraordinary events affecting performance
5. Anti-Money Laundering Compliance: Include when required by bank policies or regulatory requirements
6. Electronic Presentations: Include when electronic submission of demands is permitted
1. Form of Demand: Template for making a valid demand under the guarantee
2. Copy of Underlying Contract: Referenced contract or obligation being guaranteed (may be attached in redacted form)
3. Authorized Signatories: List of persons authorized to make demands under the guarantee
4. Arabic Translation: Official Arabic translation of the guarantee when the original is in English
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