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The Performance Bond Guarantee is a fundamental security instrument in German commercial practice, particularly crucial in construction, infrastructure, and large-scale industrial projects. It provides financial security to project owners by ensuring that a reliable third party (typically a bank or insurance company) will compensate them if the contractor fails to perform their obligations. This document type is governed by German law, specifically the provisions of the German Civil Code (BGB) regarding guarantees and sureties, and follows established German banking practices. The guarantee typically amounts to 5-10% of the contract value and remains valid until the completion of the underlying contract obligations. It includes specific requirements for demands, payment procedures, and expiry conditions, all structured to comply with German legal requirements while meeting international commercial standards.

1. Parties: Identification of the Guarantor (typically a bank or insurance company), the Beneficiary (party receiving the guarantee), and the Principal (party whose performance is being guaranteed)

2. Background: Reference to the underlying contract or obligation being guaranteed, including date, parties, and subject matter

3. Definitions: Key terms used in the guarantee, including 'Guaranteed Obligations', 'Maximum Liability Amount', and 'Expiry Date'

4. Guarantee: Core guarantee obligation, specifying the unconditional nature of the guarantee and the maximum amount

5. Demand Requirements: Formal requirements for making a valid demand under the guarantee, including any required documentation

6. Payment Terms: Timeline and process for payment upon receipt of a valid demand

7. Duration and Expiry: Term of the guarantee, conditions for expiry, and any provisions for extension

8. Reduction and Release: Circumstances under which the guarantee amount may be reduced and conditions for release of the guarantee

9. Governing Law and Jurisdiction: Explicit statement of German law as governing law and jurisdiction for disputes