The Performance Bank Guarantee serves as a risk mitigation tool in significant commercial transactions under New Zealand law. It is commonly used in construction projects, large-scale procurement, and international trade where one party requires security for the performance obligations of another. The guarantee provides the beneficiary with the assurance of receiving compensation up to a specified amount if the principal fails to fulfill their contractual obligations. The document includes specific terms regarding the guarantee amount, validity period, claim conditions, and payment terms, all structured to comply with New Zealand banking regulations and contract law. This type of guarantee is particularly valuable in high-value contracts where the financial standing of the performing party needs additional security backed by a reputable financial institution.
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1. Parties: Identifies the three key parties: the Bank (Guarantor), the Principal (party whose performance is being guaranteed), and the Beneficiary (party receiving the guarantee)
2. Background: Explains the context of the underlying contract or obligation being guaranteed and the purpose of the guarantee
3. Definitions: Defines key terms used throughout the guarantee document
4. Guarantee Amount: Specifies the maximum amount of the guarantee and any conditions related to currency or adjustments
5. Scope of Guarantee: Details what performance obligations are being guaranteed and the extent of the bank's commitment
6. Duration and Validity: Specifies the effective date, expiry date, and any conditions affecting the guarantee's validity period
7. Demand Requirements: Sets out the process and conditions for making a claim under the guarantee
8. Payment Terms: Specifies how and when payment will be made following a valid demand
9. Bank's Rights and Obligations: Details the bank's obligations and rights under the guarantee
10. Governing Law and Jurisdiction: Specifies that New Zealand law governs the guarantee and establishes jurisdiction for disputes
11. Notices: Details how formal communications between parties should be made and delivered
1. Counter-Indemnity: Used when the Principal provides indemnity to the bank for any payments made under the guarantee
2. Assignment: Include when transfer rights need to be addressed, typically restricting assignment without consent
3. Multiple Beneficiaries: Required when there is more than one beneficiary to the guarantee
4. Reduction Provisions: Include when the guarantee amount may be reduced over time or upon certain milestones
5. Force Majeure: Optional clause addressing circumstances beyond parties' control that might affect the guarantee
6. Step-In Rights: Used when the bank has the right to step in and remedy defaults before paying out the guarantee
7. Dispute Resolution: Detailed dispute resolution procedures beyond simple jurisdiction clause, including mediation or arbitration provisions
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Details: Summary or extract of the key terms from the contract being guaranteed
3. Authorization Evidence: Copies of board resolutions or other authorization documents
4. Performance Milestones: If applicable, schedule of performance milestones that may trigger or affect the guarantee
5. Bank's Standard Terms and Conditions: Standard terms that apply to all guarantees issued by the bank
6. Communication Details: Detailed contact information and addresses for all parties for formal notices
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