The Contract Performance Guarantee is a crucial security instrument in commercial transactions under Dutch law, commonly required in significant commercial contracts, construction projects, and service agreements. It provides financial security to the beneficiary by ensuring that a financial institution will compensate them up to a specified amount if the contractor fails to perform their contractual obligations. The guarantee typically remains valid from contract commencement until the completion of the contractor's obligations, including any warranty period. The document specifies the conditions for calling the guarantee, maximum liability amount, validity period, and claim procedures. This type of guarantee is particularly important in Dutch jurisdiction where it serves as a standard risk mitigation tool in commercial contracts, offering more security than simple contractual promises.
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1. Parties: Identification of the Guarantor, the Principal (Contractor), and the Beneficiary
2. Background: Context of the guarantee, including reference to the underlying contract being guaranteed
3. Definitions: Key terms used in the guarantee, including 'Guaranteed Obligations', 'Maximum Liability Amount', and 'Expiry Date'
4. Guarantee: Core obligation of the guarantor, including the maximum guaranteed amount
5. Duration: Validity period of the guarantee, including commencement and expiry dates
6. Demand Requirements: Process and formalities for making a demand under the guarantee
7. Payment Terms: Timing and method of payment upon valid demand
8. Reduction and Release: Circumstances under which the guaranteed amount may be reduced and when the guarantee will be released
9. Assignment and Transfer: Restrictions on assignment or transfer of rights under the guarantee
10. Notices: Format and method for giving notices under the guarantee
11. Governing Law and Jurisdiction: Specification of Dutch law as governing law and jurisdiction for disputes
1. Multiple Guarantors: Required when there is more than one guarantor, specifying joint and several liability
2. Counter-Indemnity: Used when the principal provides counter-indemnity to the guarantor
3. Conditions Precedent: Needed for conditional guarantees where specific conditions must be met before the guarantee can be called
4. Currency Provisions: Required for international guarantees involving multiple currencies
5. Step-In Rights: Optional provisions allowing the guarantor to step in and perform the contract in case of contractor default
6. Tax Gross-Up: Required when payments under the guarantee may be subject to withholding tax
7. Anti-Money Laundering Compliance: Required for guarantees issued by financial institutions subject to specific regulatory requirements
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Details: Summary or extract of the main contract being guaranteed
3. Performance Milestones: List of key performance milestones from the underlying contract that trigger guarantee obligations
4. Authorized Signatories: List of persons authorized to make demands under the guarantee
5. Bank Account Details: Payment details for the beneficiary
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