Financial Guarantee And Performance Guarantee documents are essential instruments in UAE commercial practice, particularly in large-scale projects and significant business transactions. These documents are commonly required in construction contracts, supply agreements, and service contracts where both financial security and performance assurance are crucial. The guarantee typically specifies a maximum financial liability amount and detailed performance criteria, combining the features of traditional bank guarantees with performance bonds. Under UAE law, these guarantees must comply with specific requirements of the Civil Code and Banking regulations, making them robust instruments for risk mitigation. They are particularly valuable when the underlying transaction involves substantial financial commitments alongside critical performance obligations, providing beneficiaries with comprehensive protection against both monetary and performance defaults.

1. Parties: Identification of Guarantor, Principal (the party whose obligations are being guaranteed), and Beneficiary

2. Background: Context of the guarantee, reference to the underlying agreement/obligation being guaranteed

3. Definitions: Key terms including Guaranteed Obligations, Guarantee Amount, Expiry Date, and Performance Standards

4. Scope of Guarantee: Clear delineation of both financial and performance obligations being guaranteed

5. Guarantee Amount: Specification of the maximum financial liability and any automatic reduction mechanisms

6. Duration and Validity: Term of the guarantee, conditions for extension, and expiry conditions

7. Demand Procedures: Process and requirements for making a claim under the guarantee

8. Performance Standards: Specific performance metrics or standards that must be maintained

9. Payment Obligations: Terms for payment upon demand, currency, and payment mechanics

10. Representations and Warranties: Standard declarations by the Guarantor regarding capacity and authority

11. Events of Default: Circumstances constituting default and consequences

12. Governing Law and Jurisdiction: Specification of UAE law and relevant courts

13. Notices: Communication procedures and contact details