The Payment Undertaking Agreement is a critical instrument in German commercial practice, commonly used where robust payment assurance is required. It creates a primary obligation for the payment undertaker to make specified payments, independent of underlying transactions or relationships. The document is particularly valuable in project finance, cross-border transactions, and complex commercial arrangements where parties seek payment certainty. Under German law, these agreements must be carefully structured to ensure enforceability and compliance with banking regulations, particularly the German Banking Act (KWG) and Civil Code (BGB). The agreement typically includes detailed payment mechanics, conditions precedent, and enforcement provisions, making it a preferred instrument for securing payment obligations in high-value transactions.

1. Parties: Identification of the payment undertaker (promisor) and the beneficiary (promisee)

2. Background: Context of the payment undertaking, including reference to the underlying transaction or relationship

3. Definitions: Definitions of key terms used in the agreement, including Payment Obligation, Payment Date, etc.

4. Payment Undertaking: Core section detailing the precise nature and scope of the payment obligation

5. Payment Terms: Specific details about amount, currency, timing, and mechanism of payments

6. Conditions to Payment: Any prerequisites that must be met before the payment obligation becomes effective

7. Representations and Warranties: Standard representations about capacity, authority, and enforceability

8. Independent Obligation: Clause establishing that the undertaking is independent of other obligations

9. Taxes and Deductions: Provisions regarding tax treatment and any permitted/prohibited deductions

10. Events of Default: Circumstances that trigger immediate payment obligation or other remedies

11. Notices: Communication requirements and contact details

12. Governing Law and Jurisdiction: Confirmation of German law governance and jurisdiction for disputes

13. Miscellaneous: Standard boilerplate provisions including severability, amendments, etc.