The Contract Performance Guarantee is a crucial security instrument in Pakistani commercial and construction projects, required when a contractor undertakes significant project works or services. It provides financial security to project owners by ensuring that a bank or financial institution will pay a specified sum if the contractor fails to perform their contractual obligations. The guarantee, governed by Pakistani law, particularly the Contract Act 1872 and banking regulations, typically amounts to 5-10% of the contract value. It becomes effective upon issuance and remains valid throughout the contract period, often extending beyond completion to cover defect liability periods. The document is essential for risk mitigation in large-scale projects and is often a mandatory requirement in government tenders and significant commercial contracts.
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1. Title and Date: Clear identification of the document as a Contract Performance Guarantee with date of issuance
2. Parties: Details of the Guarantor (Bank/Financial Institution), Principal (Contractor/Service Provider), and Beneficiary
3. Reference Information: Details of the underlying contract/tender and any reference numbers
4. Guarantee Amount: The maximum amount of the guarantee expressed in both figures and words
5. Underlying Contract: Brief description of the main contract/project for which the guarantee is being issued
6. Guarantee Terms: Core obligations of the guarantor, including conditions for payment and nature of the guarantee (unconditional, on-demand, etc.)
7. Validity Period: Clear statement of when the guarantee becomes effective and its expiry date
8. Claim Procedure: Process and requirements for making a claim under the guarantee
9. Governing Law: Specification of Pakistani law as the governing law
10. Execution Block: Signature blocks for authorized bank officials with official stamp
1. Counter Guarantee: Required when the guarantee is issued through a correspondent bank or involves multiple banking parties
2. Assignment Clause: Include when the beneficiary may need the right to assign the guarantee
3. Force Majeure: Optional clause defining force majeure events and their impact on the guarantee
4. Dispute Resolution: Detailed dispute resolution mechanism, needed for high-value or complex guarantees
5. Reduction Clause: Include when the guarantee amount may be reduced in stages as the underlying contract progresses
6. Language Clause: Required when the guarantee might be used internationally or with foreign parties
7. Notice Requirements: Detailed notification procedures, recommended for complex projects or when multiple parties are involved
1. Form of Demand: Template for making a claim under the guarantee
2. Copy of Underlying Contract: Reference copy of the main contract (usually only relevant pages)
3. Bank's Authorization: Evidence of the signing authority's power to issue the guarantee
4. Performance Milestones: If the guarantee amount reduces in stages, schedule of reduction milestones
Find the exact document you need
Contract Performance Guarantee
A Pakistani law-governed bank guarantee securing a contractor's performance obligations, providing financial assurance to project owners through an unconditional payment commitment.
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Performance Guarantee Bond
A Pakistani law-governed financial guarantee instrument where a bank ensures payment to a beneficiary if a contractor defaults on their obligations.
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