A Performance Letter of Credit is commonly used in commercial transactions where one party seeks assurance of the other party's performance of contractual obligations. This banking instrument, governed by Indian law and regulated by the Reserve Bank of India, provides financial security to the beneficiary while allowing the applicant to demonstrate their commitment to fulfilling contractual obligations. The document is particularly relevant in high-value contracts, international trade, and projects where performance risk needs to be mitigated. It includes specific terms regarding the performance obligations, conditions for drawing under the credit, required documentation, and payment terms. The Performance Letter of Credit follows both Indian banking regulations and international banking practices (UCP 600), making it a robust instrument for securing performance in commercial contracts.
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1. Letter Header: Bank's letterhead, reference number, date, and type of Letter of Credit (Performance L/C)
2. Beneficiary Details: Full name and address of the party in whose favor the L/C is issued
3. Applicant Details: Full name and address of the party requesting the L/C
4. Credit Number: Unique identification number of the Letter of Credit
5. Underlying Contract Reference: Details of the contract or agreement for which the Performance L/C is being issued
6. Amount and Currency: The maximum drawable amount and currency of the Letter of Credit
7. Expiry Details: Expiry date and place of the Letter of Credit
8. Performance Conditions: Specific conditions related to the performance obligations that trigger the L/C
9. Drawing Terms: Conditions and documentation required for drawing under the L/C
10. Governing Law and Jurisdiction: Specification of Indian law as governing law and relevant jurisdiction
11. UCP Declaration: Statement that the L/C is subject to UCP 600
1. Partial Drawings: Include when partial drawings are to be allowed under the L/C
2. Transferability Clause: Include when the L/C needs to be transferable to another beneficiary
3. Counter-Guarantee Details: Include when there's a counter-guarantee from another bank involved
4. Special Instructions: Include when there are specific instructions for document presentation or payment
5. Force Majeure Clause: Include when specific force majeure conditions need to be detailed
6. Amendment Conditions: Include when specific conditions for amendments need to be detailed
1. Schedule A - Required Documents: Detailed list of documents required for drawing under the L/C
2. Schedule B - Performance Standards: Detailed description of the performance standards that must be met
3. Schedule C - Drawing Certificate Format: Format of the certificate to be presented when making a drawing
4. Appendix 1 - Bank Details: Complete banking details for all parties involved
5. Appendix 2 - Authorized Signatories: List of authorized signatories and their specimen signatures
Relevant legal definitions
Clauses
Relevant Industries
Construction
Manufacturing
Infrastructure
Energy
International Trade
Engineering
Technology Services
Telecommunications
Defense
Mining
Oil and Gas
Heavy Industries
Project Development
Renewable Energy
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Risk Management
Operations
Procurement
Commercial
Project Management
International Business
Credit Control
Contract Administration
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Trade Finance Manager
Contract Manager
Project Manager
Legal Counsel
Banking Relationship Manager
Risk Manager
Commercial Director
Operations Director
Procurement Manager
Company Secretary
Credit Manager
International Trade Specialist
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