Performance Letter Of Guarantee for Germany

Performance Letter Of Guarantee Template for Germany

A Performance Letter of Guarantee under German law (Leistungsgarantie/Bankbürgschaft) is a financial instrument issued by a bank that provides assurance to a beneficiary regarding the performance obligations of a principal party. Governed by the German Civil Code (BGB) and banking regulations, this document serves as an independent guarantee where the bank commits to pay a specified sum upon the beneficiary's valid claim of non-performance. The guarantee includes specific terms regarding the scope of guaranteed performance, conditions for payment, claim procedures, and validity period, all structured in accordance with German legal requirements and banking practices.

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What is a Performance Letter Of Guarantee?

The Performance Letter of Guarantee is a crucial financial instrument in German commercial transactions, particularly utilized in projects requiring substantial performance commitments. This document is commonly required in construction projects, international trade, and large-scale industrial undertakings where one party needs assurance of the other's performance capabilities. Under German law, these guarantees are typically issued by banks and are governed by the German Civil Code (BGB) and banking regulations. The guarantee provides an independent payment obligation, separate from the underlying contract, offering beneficiaries immediate access to funds upon valid claim. It includes essential details such as the guaranteed amount, validity period, specific performance criteria, and claim procedures. The Performance Letter of Guarantee serves as a risk mitigation tool, providing financial security while facilitating business transactions in various sectors.

What sections should be included in a Performance Letter Of Guarantee?

1. Issuing Bank Details: Full name and address of the issuing bank

2. Beneficiary Details: Full name and address of the party receiving the guarantee

3. Principal Details: Full name and address of the party on whose behalf the guarantee is issued

4. Guarantee Number: Unique reference number for the guarantee

5. Underlying Transaction Reference: Reference to the main contract or obligation being guaranteed

6. Guarantee Amount: The maximum sum guaranteed, specified in numbers and words

7. Guarantee Scope: Clear description of the performance obligations being guaranteed

8. Conditions for Payment: Specific conditions under which the guarantee can be called

9. Claim Procedure: Process and requirements for making a claim under the guarantee

10. Validity Period: Effective date and expiry date of the guarantee

11. Governing Law Declaration: Express statement that the guarantee is governed by German law

12. Authorization and Signatures: Official bank signatures and stamps

What sections are optional to include in a Performance Letter Of Guarantee?

1. Language Provision: Required when the guarantee might be used internationally, specifying which language version prevails

2. Transferability Clause: Include when the guarantee needs to be transferable to another beneficiary

3. Reduction Clause: Include when the guarantee amount should reduce progressively based on performance milestones

4. Force Majeure Provisions: Include for international transactions or when specifically requested by parties

5. Jurisdiction Clause: Include when specific courts need to be designated for dispute resolution

6. Counter-Guarantee Reference: Include when the guarantee is issued under a counter-guarantee arrangement

What schedules should be included in a Performance Letter Of Guarantee?

1. Performance Criteria Schedule: Detailed description of the performance standards or milestones that are being guaranteed

2. Claim Documentation Requirements: List of specific documents required to be submitted with any claim

3. Authorized Signatories: List of persons authorized to make claims under the guarantee

4. Payment Instructions: Banking details and procedure for payment under the guarantee

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Germany

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant Industries

Construction

Manufacturing

International Trade

Infrastructure Development

Energy

Real Estate Development

Engineering

Telecommunications

Defense Contracting

Transportation

Banking and Financial Services

Industrial Projects

Relevant Teams

Legal

Finance

Treasury

Risk Management

Procurement

Commercial

Project Management

Compliance

Business Development

Contract Administration

Relevant Roles

Project Manager

Contract Manager

Chief Financial Officer

Treasury Manager

Legal Counsel

Risk Manager

Commercial Director

Procurement Manager

Business Development Manager

Finance Director

Bank Relationship Manager

Compliance Officer

Project Director

Construction Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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