The Performance Guarantee Bond is a crucial security instrument in commercial transactions under Dutch law, particularly used in construction, infrastructure projects, and international trade. It provides financial security to the beneficiary (typically a project owner or employer) against the risk of non-performance or default by the principal (usually a contractor or supplier). The document specifies the guaranteed amount, typically ranging from 5% to 15% of the underlying contract value, and outlines the conditions and procedures for calling upon the guarantee. This type of bond is especially important in large-scale projects where significant financial commitments are involved and where the beneficiary requires security against potential defaults or performance failures. The guarantee is typically issued by a bank or financial institution and must comply with both Dutch civil law requirements and financial regulations, including the Dutch Financial Supervision Act (Wet op het financieel toezicht).
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1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Principal (party whose performance is being guaranteed), and the Beneficiary
2. Background: Context of the underlying contract or obligation being guaranteed and the reason for providing the guarantee
3. Definitions: Key terms used throughout the guarantee, including 'Guaranteed Obligations', 'Maximum Liability Amount', and 'Expiry Date'
4. Guarantee: Core guarantee provisions, including the scope and nature of the guarantee obligations
5. Maximum Liability: Specification of the maximum amount for which the guarantor can be held liable
6. Demand Requirements: Formal requirements for making a valid demand under the guarantee, including format and supporting documentation
7. Payment Terms: Timeframe and conditions for payment upon receipt of a valid demand
8. Duration and Expiry: Term of the guarantee and conditions for expiry or termination
9. Governing Law and Jurisdiction: Confirmation of Dutch law as governing law and designation of competent courts
1. Counter-Indemnity: Terms under which the Principal indemnifies the Guarantor - included when the guarantee document also serves as the counter-indemnity agreement
2. Assignment and Transfer: Provisions regarding the transferability of the guarantee - included when transfer rights are to be specifically addressed
3. Reduction Provisions: Mechanisms for reducing the guarantee amount over time - included for long-term projects with phased completions
4. Multiple Beneficiaries: Special provisions for cases with more than one beneficiary - included in syndicated or multi-party arrangements
5. Force Majeure: Provisions dealing with extraordinary events - included when specific force majeure protection is required
6. Language Provisions: Provisions regarding official language and translations - included when multiple language versions exist
7. Anti-Money Laundering Compliance: Specific compliance requirements - included when required by the guarantor's internal policies
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Extract: Relevant excerpts from the underlying contract being guaranteed
3. Authorized Signatories: List of persons authorized to make demands under the guarantee
4. Payment Instructions: Banking and payment details for guarantee payments
5. Performance Milestones: Schedule of project milestones relevant to the guarantee (if applicable)
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